COMPETENCE CHANGE FUTURE

ALLIANZ SE ANNUAL REPORT 2017

To go directly to any chapter, simply click All references to chapters, pages, notes, on the headline or the page number. internet pages, etc. within this report are also linked. CONTENT

A _ To Our Investors Pages 1 – 8

2 Supervisory Board Report 7 Mandates of the Members of the Supervisory Board 8 Mandates of the Members of the Board of Management

B _ Management Report of Allianz SE Pages 9 – 52

10 Executive Summary and Outlook 14 Operations by Reinsurance Lines of Business 16 Balance Sheet Review 18 Liquidity and Funding Resources 19 Risk and Opportunity Report 29 Corporate Governance Report

34 Statement on Corporate Management pursuant to § 289f of the HGB 37 Remuneration Report 48 Other Information

C _ Financial Statements of Allianz SE Pages 53 – 82

FINANCIAL STATEMENTS 54 Balance Sheets 56 Income Statement

NOTES TO THE FINANCIAL STATEMENTS 57 Nature of Operations and Basis of Preparation 57 Accounting, Valuation and Calculation Methods 60 Supplementary Information on Assets 63 Supplementary Information on Equity and Liabilities 70 Supplementary Information on the Income Statement 73 Other Information 76 List of Participations of Allianz SE, Munich as of 31 December 2017

according to § 285 No. 11 and 11b HGB in conjunction with § 286 (3) No. 1 HGB

D _ Further Information Pages 83 – 88

84 Responsibility Statement 85 Independent Auditor’s Report

Disclaimer regarding roundings Due to rounding, numbers presented may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.

TO OUR INVESTORS A

Annual Report 2017 – Allianz SE 1 Repor t A _ To Our Investors

SUPERVISORY BOARD REPORT

Ladies and Gentlemen,

During the financial year 2017, the Supervisory Board fulfilled all its duties and obligations as laid out in the company statutes and applicable law. It monitored the management of the company, devoted particular attention to succession matters related to the Board of Management, and advised the Board of Management regarding the conduct of business.

OVERVIEW In the financial year 2017, the Supervisory Board held seven meetings and a conference call. The regular meet- ings took place in February, March, May, August, October, and December. In addition, a constituent meeting took place after the election of the new Supervisory Board by the Annual General Meeting (AGM) 2017.

In all of the Supervisory Board’s 2017 meetings, the Board of Management reported on Group revenues and results as well as developments in individual business segments. The Board of Management informed us on the course of business as well as on the development of the Allianz SE and Allianz Group, including deviations in actual business developments from the planning. The Board of Management reported to the Supervisory Board on a regular basis and in a timely and comprehensive manner, both verbally and in writing.

Key reporting issues were strategic topics, such as the implementation of the Renewal Agenda and the portfolio strategy, the risk strategy and capital management, as well as the strategy in the Asset Management business segment and the global health insurance. In addition, the Supervisory Board was extensively involved in the Board of Management’s planning for both the financial year 2018 and the three-year period from 2018 to 2020. Cyber risk security was discussed regularly. A Technology Committee was established to carry out in-depth re- views of IT issues, the digitalization of the business model, and new technologies. In addition, the Supervisory Board dealt with the implementation of the new recommendations of the German Corporate Governance Code (Code), the legislation regarding the implementation of the EU guideline on corporate social responsibility (CSR), as well as the supervisory authority’s (BaFin’s) new requirements for self-assessments by the Supervisory Board. In November 2017, a conference call was held regarding the Board of Management’s considerations for a potential further share buy-back program.

The Board of Management’s verbal reports at the meetings were accompanied by written documents, which were sent to each member of the Supervisory Board in time for the relevant meeting. The Board of Manage- ment also informed us in writing of important events that occurred between meetings. The chairmen of the Supervisory and Management Boards also had regular discussions about major developments and decisions. The Chairman of the Supervisory Board also had individual discussions with each member of the Board of Man- agement about their respective half-year as well as full-year performance.

Details on each member’s participation at meetings of the Supervisory Board and its committees can be found in the Corporate Governance Report, starting on page 29. Members of the Supervisory Board who were unable to attend meetings of the Supervisory Board or its committees were excused and, as a rule, cast their votes in writing.

ISSUES DISCUSSED IN THE SUPERVISORY BOARD PLENARY SESSIONS In the meeting of 16 February 2017, the Supervisory Board dealt comprehensively with the preliminary financial figures for the financial year 2016, the Board of Management’s dividend strategy, and the consideration of a share buy-back program. The appointed audit firm, KPMG AG Wirtschaftsprüfungsgesellschaft (KPMG), Munich, reported in detail on the preliminary results of their audit. The Chief Compliance Officer then gave his annual report on the compliance organization and key compliance-related matters. In the further course of the meeting, the Supervisory Board also examined the portfolio strategy in growth markets, discussed the target achievement of the individual members of the Board of Management, and finally set their variable remuneration for the financial year 2016. In the course of the performance assessment, the fitness and propriety of the members of the Board of Management was also confirmed.

In the meeting of 9 March 2017, the Supervisory Board discussed the audited annual Allianz SE and consolidat- ed financial statements as well as the recommendation for the appropriation of earnings by the Board of Man-

2 Annual Report 2017 – Allianz SE A _ To Our Investors

agement for the financial year 2016. The auditors confirmed that there were no discrepancies to their February report, and issued an unqualified auditor’s report for the individual and consolidated financial statements. In addition, the Board of Management submitted its report on risk developments in 2016 and the head of internal audit presented his annual review. Furthermore, the Supervisory Board dealt with the agenda and the proposals for resolution for the 2017 AGM of Allianz SE. It also resolved to appoint KPMG as auditor for the individual and consolidated financial statements for the financial year 2017 and for the auditor’s review of the 2017 half-yearly financial report. Given the legally required rotation of the auditors, the Supervisory Board approved the pro- posal of the Audit Committee to select PriceWaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft (PwC) to audit the individual and consolidated financial statements of Allianz SE as from financial year 2018. In addi- tion, the Supervisory Board was also informed about the implementation status of the Renewal Agenda as well as the strategy pursued in the Asset Management business segment. The Supervisory Board dealt extensively with personnel matters related to the Board of Management, specifically regarding Dr. Mascher, Dr. Wemmer, and Dr. Zedelius, whose appointments expired at the end of 2017. Dr. Mascher’s appointment was renewed for three years. As successors to Dr. Wemmer and Dr. Zedelius, who had both reached retirement age, the Supervi- sory Board appointed Niran Peiris and Giulio Terzariol to the Board of Management with effect from 1 January 2018.

On 3 May 2017, just before the AGM, the Board of Management briefed us on the first quarter 2017 perfor- mance and on the Group’s current situation. In addition, the Board dealt with the results of the BaFin’s review of the system of governance at Allianz SE in November 2016.

Due to the elections to the Supervisory Board at the AGM 2017, a constituent meeting was held on 3 May 2017, immediately after the AGM. At this constituent meeting Dr. Perlet was initially elected as Chairman of the Super- visory Board for the brief period until 6 May 2017. Mr. Diekmann was elected to succeed him, effective 7 May 2017. This transitional arrangement was necessary due to the two-year waiting period applicable for Mr. Diekmann under corporate law. Mr. Snabe and Mr. Zimmermann were elected as Deputy Chairmen. In addition, the Supervisory Board elected the members of the committees and approved Dr. Eichiner to be the financial

expert as defined in § 100 (5) of the German Stock Corporation Act (AktG). The Supervisory Board also adopted a resolution to establish an additional Board committee: the Technology Committee. In June 2017, the new members of the Supervisory Board attended a separate information session in order to familiarize themselves with the Allianz business model and the structures of the Allianz Group.

At the meeting on 3 August 2017, the Board of Management first reported extensively on the half-yearly results. It additionally addressed the upcoming investment in the UK property insurance firm Liverpool Victoria, the sale of the Allianz holding in Oldenburgische Landesbank AG, and the impact of Banco Santander’s acquisition of Banco Popular, a long-standing distribution and joint venture partner in Spain. The Board of Management then reported on the strategic dialog with the Group companies, particularly regarding the progress of the Renewal Agenda. In addition, the Board of Management provided a status report on cyber risk security. The Supervisory Board amended the Rules of Information for Reports by the Board of Management to the Supervisory Board in order to comply with new regulatory requirements. Finally, the Board of Management reported on the percent- age of women in management positions. Thereafter, the Supervisory Board set a new target for the percentage of women in Allianz SE’s Board of Management. This target is also a component of the diversity concept for the Board of Management, which was to be established in accordance with the new CSR regulations. A correspond- ing diversity concept for the Supervisory Board was included into the objectives for the composition of the Su- pervisory Board, as well as a profile of skills and expertise for the Supervisory Board which is required under a new Code recommendation (see page 35).

The meeting on 13 October 2017 mainly focused on the strategy of the Allianz Group, in particular the respective external conditions including potentially disruptive developments and the implementation status of the Renewal Agenda, as well as the strategy of Allianz SE (solo). In addition, the Supervisory Board dealt in detail with the global health insurance business. The review of the Board of Management’s report on the development of busi- ness also covered the effects of the recent natural catastrophes in the Caribbean and in Mexico, the implemen- tation of the European Data Protection Regulation in the Allianz Group, and the change of the Chairman of the Board of Management at Allianz Deutschland AG.

At the meeting on 14 December 2017, the Board of Management briefed us on the results of the third quarter, further business developments and the situation of the Allianz Group, capital adequacy, and the planned tender offer to the minority shareholders of Euler Hermes S.A. The Supervisory Board additionally dealt with the plan-

Annual Report 2017 − Allianz SE 3 Repor t A _ To Our Investors

ning for financial year 2018 and the three-year plan 2018 to 2020, as well as the new requirements for non- financial reporting that follow from the implementation of the European CSR Directive. In this regard, we ap- proved the recommendation of the Audit Committee to engage PwC to perform a limited assurance engage- ment of the combined separate non-financial report for the financial year 2017. The Board of Management also provided a status report on the issue of cyber risk security and the efficiency of distribution channels. We then covered the Code’s Declaration of Conformity and the annual report on the succession planning for the Board of Management. The Supervisory Board reviewed the appropriateness of the remuneration of the Board of Man- agement based on a vertical and horizontal comparison, and decided to increase the remuneration of the Chairman of the Board of Management in accordance with the identified need for adjustment. Finally, it set targets for the variable remuneration of the members of the Board of Management for 2018.

DECLARATION OF CONFORMITY WITH THE GERMAN CORPORATE GOVERNANCE CODE On 14 December 2017, the Board of Management and the Supervisory Board issued the Declaration of Con-

formity in accordance with § 161 of the German Stock Corporation Act (“Aktiengesetz”). The Declaration was posted on the company website, where it is available to shareholders at all times. Allianz SE fully complies and will continue to fully comply with the recommendations of the German Corporate Governance Code in its version of 7 February 2017.

Further explanations on corporate governance in the Allianz Group can be found in the Corporate Governance

Report starting on page 29 and the Statement on Corporate Management pursuant to § 289f of the HGB starting on page 34. The Allianz website also provides more details on corporate governance: www.allianz.com/corporate-governance.

COMMITTEE ACTIVITIES The Supervisory Board has formed various committees in order to perform its duties efficiently. The committees prepare the consulting and adoption of resolutions in the plenary sessions; they can also adopt resolutions themselves.

The Standing Committee conducted three meetings in 2017. It dealt primarily with issues of corporate govern- ance, particularly the implementation of the Code’s new recommendations, the modification of the Rules of Information for Reports by the Board of Management to the Supervisory Board, the preparations for the Annual General Meeting, the employee stock purchase program, and the Supervisory Board’s self-assessment as well as the resulting development plan. In addition, the Standing Committee dealt with the appropriateness of the remu- neration of the Supervisory Board. The committee also passed resolutions to approve loans to senior executives.

The Personnel Committee held four meetings in 2017. It dealt extensively with the issue of succession to Dr. Wemmer and Dr. Zedelius. The committee also looked at other mandate matters for active and former members of the Board of Management and the target achievement among Board of Management members for 2016. Besides setting the targets for variable remuneration in 2018, the committee also prepared the adequacy assessment of the remuneration system. As a result, the committee identified the need to adjust the remuneration of the Chair- man of the Board of Management. Furthermore, the Personnel Committee also dealt with the diversity concept for the Board of Management, including the legally required target for the percentage of women in the Board of Management.

The Audit Committee held five regular meetings and adopted two resolutions by written procedure in 2017. In the presence of the auditors, it discussed the annual financial statements of Allianz SE and the consolidated financial statements of the Allianz Group, the management reports and auditor’s reports, and the half-yearly financial report. The Audit Committee saw no reason to raise any objections. In addition, the Board of Man- agement submitted its report on the results of the first and third quarter. The committee also dealt with the auditor’s engagement and established audit areas of focus for the 2017 financial year. It further discussed assignments to the auditors for non-audit services and approved an appropriate positive list for audit and non- audit services authorized in advance. In addition, it dealt extensively with the compliance system, the internal audit system, and the financial reporting process as well as the respective internal controls. The committee was also updated on the procedures and programs for complaints concerning matters in accounting, internal con- trols, and auditing. The committee received regular reports on legal and compliance issues and on the work of the Internal Audit department. In addition, the Audit Committee dealt with the preparations for the auditor rotation starting from the financial year 2018, including the process of transitioning to the new auditing company, as well as the 2017 audit plan of the Internal Audit function. The committee’s work focused on several issues

4 Annual Report 2017 – Allianz SE A _ To Our Investors

regarding Solvency II, including Solvency II governance and Solvency II reporting. In this respect it also initiated a follow-up review of the group-wide implementation of governance requirements. The committee also addressed the findings of a BaFin review as well as the new legal requirements for non-financial reporting (CSR) and the Supervisory Board’s role in this regard. In addition, the head of the Group Actuarial function presented its annual report. The committee adopted two written resolutions approving the engagement of the current and future auditors to perform non-audit services at foreign Group companies.

The Risk Committee held two meetings in 2017, during which it discussed the current risk situation of the Allianz Group and Allianz SE with the Board of Management. The risk report and other risk-related statements contained in the annual financial statements – both of Allianz SE and consolidated – were reviewed with the auditor, as were the respective management reports, and the Audit Committee was informed of the result. The appropriateness of the early risk recognition system at Allianz and the result of further, voluntary risk assessments by the auditor were also discussed. The committee took a detailed look at the risk strategy and capital management, as well as the effectiveness of the risk management system, in particular the limit system for the Allianz Group and Allianz SE. It also dealt extensively with the interest rate sensitivity in the life insurance business, discussed possible measures to reduce it, and addressed the investment risk currently associated with equity investments and credit spreads. Other matters considered included the risk strategy of Allianz SE and the Allianz Group, the changes planned in 2017 to the internal Solvency II model, and the report on the own risk and solvency assessment (ORSA). In addition, the Risk Committee dealt with the designation of Allianz as a systemically relevant insurer (G-SII).

The Technology Committee held two meetings in 2017. In the first meeting it dealt with the major focus and organization of the committee’s work as well as the current IT-Systems and the IT-Architecture within the Allianz Group. In both meetings the committee dealt with the status of the project to assess the future readiness of the Allianz Group's IT. In addition, the committee discussed IT Governance and IT Security.

The Nomination Committee had no reason to convene a meeting in financial year 2017.

The Supervisory Board was informed regularly and comprehensively of the committees’ work.

CHAIR AND COMMITTEES OF THE SUPERVISORY BOARD – AS OF 31 DECEMBER 2017 Chairman: Michael Diekmann Vice Chairmen: Jim Hagemann Snabe, Rolf Zimmermann Standing Committee: Michael Diekmann (Chairman), Gabriele Burkhardt-Berg, Herbert Hainer, Jürgen Lawrenz, Jim Hagemann Snabe Personnel Committee: Michael Diekmann (Chairman), Herbert Hainer, Rolf Zimmermann Audit Committee: Dr. Friedrich Eichiner (Chairman), Sophie Boissard, Jean-Jacques Cette, Michael Diekmann, Martina Grundler Risk Committee: Michael Diekmann (Chairman), Christine Bosse, Dr. Friedrich Eichiner, Godfrey Hayward, Jürgen Lawrenz Technology Committee: Jim Hagemann Snabe (Chairman), Gabriele Burkhardt-Berg, Michael Diekmann, Dr. Friedrich Eichiner, Rolf Zimmermann Nomination Committee: Michael Diekmann (Chairman), Christine Bosse, Jim Hagemann Snabe

AUDIT OF ANNUAL ACCOUNTS AND CONSOLIDATED FINANCIAL STATEMENTS In compliance with the special legal provisions applying to insurance companies, the statutory auditor and the auditor for the review of the half-yearly financial report are appointed by the Supervisory Board of Allianz SE, not by the AGM. The Supervisory Board appointed KPMG as statutory auditor for the annual Allianz SE and consolidated financial statements, as well as for the review of the half-yearly financial report of the financial year 2017. KPMG audited the financial statements of Allianz SE and the Allianz Group as well as the respec- tive management reports. They issued an auditor’s report without any reservations. The consolidated finan- cial statements were prepared on the basis of the International Financial Reporting Standards (IFRS), as adopted in the European Union. KPMG performed a review of the half-yearly financial report. In addition, KPMG was also mandated to perform an audit of the market value balance sheet according to Solvency II as of 31 December 2017, for Allianz SE and the Allianz Group.

All Supervisory Board members received the documentation relating to the annual financial statements and the auditor’s reports from KPMG on schedule. The preliminary financial statements and KPMG’s preliminary

Annual Report 2017 − Allianz SE 5 Repor t A _ To Our Investors

audit results were discussed in the Audit Committee on 14 February 2018 as well as in the plenary session of the Supervisory Board on 15 February 2018. The final financial statements and KPMG’s audit reports (dated 28 February 2018) were reviewed on 8 March 2018, both by the Audit Committee and in the Supervisory Board plenary session. The auditors participated in these discussions and presented the key results from their audit. Particular focus was given to the key audit matters described in the auditor’s report and the audit procedures performed. No material weaknesses in the internal financial reporting control process were discovered. There were no circumstances that might give cause for concern about the auditor’s independence. In addition, the market value balance sheets for Allianz SE and the Allianz Group as of 31 December 2017 as well as the respec- tive KPMG reports were addressed by the Audit Committee and Supervisory Board.

On the basis of our own reviews of the annual Allianz SE and consolidated financial statements, the manage- ment and group management reports, and the recommendation for appropriation of earnings, we raised no objections and agreed with the results of the KPMG audit. We approved the Allianz SE and consolidated finan- cial statements prepared by the Board of Management. The financial statements are thus adopted. We agree with the Board of Management’s proposal on the appropriation of earnings.

The Supervisory Board would like to thank all Allianz Group employees for their great personal commitment over the past year.

LIMITED ASSURANCE ENGAGEMENT OF THE COMBINED SEPARATE NON-FINANCIAL REPORT The financial year 2017 was the first year for which the company was required to issue a separate non-financial report. This report was combined for Allianz SE and the Allianz Group. The Supervisory Board commissioned PwC to perform a limited assurance engagement of this report. All Supervisory Board members received the combined separate non-financial report and the independent practitioner´s limited assurance report from PwC in due time. The report and PwC’s assurance report were discussed in the plenary session of the Supervisory Board on 8 March 2018. The auditors from PwC participated in these discussions and presented the results of their assurance engagement. Based on its own review of the combined separate non-financial report, the Su- pervisory Board did not raise any objections and approved by acknowledgement the results of the PwC limited assurance engagement.

MEMBERS OF THE SUPERVISORY BOARD AND BOARD OF MANAGEMENT The term of the Supervisory Board expired with the conclusion of the AGM on 3 May 2017. The new employee representatives had been appointed by the SE Works Council pursuant to the Agreement concerning the Partic- ipation of Employees in Allianz SE, effective from the conclusion of the Annual General Meeting on 3 May 2017. The Annual General Meeting 2017 elected the new shareholder representatives. The Supervisory Board man-

dates of Prof. Dr. Renate Köcher, Dante Barban, and Dr. Wulf H. Bernotat ended with the conclusion of the Annu- al General Meeting on 3 May 2017. Dr. Helmut Perlet resigned from the Supervisory Board with effect from the end of 6 May 2017. The Supervisory Board thanked all retired members for their many years of support for the Allianz Group as well as for the valuable and trusting collaboration in this board.

As mentioned earlier, the 2017 financial year also saw personnel changes within Allianz SE’s Board of Man- agement. Dr. Dieter Wemmer and Dr. Werner Zedelius stepped down from the Board of Management with effect from 31 December 2017. Mr. Niran Peiris and Giulio Terzariol were appointed as successors, effective 1 January 2018.

Munich, 8 March 2018

For the Supervisory Board:

Michael Diekmann Chairman

6 Annual Report 2017 – Allianz SE A _ To Our Investors

MANDATES OF THE MEMBERS OF THE SUPERVISORY BOARD

DR. HELMUT PERLET DANTE BARBAN MARTINA GRUNDLER until 6 May 2017 until 3 May 2017 National Representative Insurances, ver.di Berlin Chairman Employee of Allianz S.p.A. Member of various Supervisory Boards Membership in other statutory supervisory boards HERBERT HAINER and SE administrative boards in Germany SOPHIE BOISSARD since 3 May 2017 Commerzbank AG since 3 May 2017 Member of various Supervisory Boards GEA Group AG (Chairman) Chairwoman of the Board of Management of Membership in other statutory supervisory boards Korian S.A. and SE administrative boards in Germany Membership in other statutory supervisory boards Deutsche Lufthansa AG MICHAEL DIEKMANN and SE administrative boards in Germany FC Bayern München AG since 7 May 2017 Curanum AG (Korian Group company, Chairwoman) Membership in comparable1 supervisory bodies Chairman Membership in comparable1 supervisory bodies Accenture Plc Member of various Supervisory Boards Groupe Société des Autoroutes du Nord et de l‘Est de Sportradar AG (Chairman) Membership in other statutory supervisory boards la France (Sanef) and SE administrative boards in Germany until 30 June 2017 BASF SE Segesta SpA (Korian Group company, Chairwoman) GODFREY ROBERT HAYWARD Fresenius Management SE Senior Living Group NV (Korian Group company) since 3 May 2017 Fresenius SE & Co. KGaA Employee of Allianz Insurance plc Linde AG CHRISTINE BOSSE until 10 May 2017 PROF. DR. RENATE KÖCHER Siemens AG Member of various Supervisory Boards Membership in comparable1 supervisory bodies until 3 May 2017 P/F BankNordik (Chairwoman) Head of “Institut für Demoskopie Allensbach” DR. WULF H. BERNOTAT TDC A/S (Allensbach Institute) until 3 May 2017 Membership in other statutory supervisory boards Vice Chairman and SE administrative boards in Germany Member of various Supervisory Boards GABRIELE BURKHARDT-BERG BMW AG Membership in other statutory supervisory boards Chairwoman of the Group Works Council of Allianz SE Infineon Technologies AG and SE administrative boards in Germany Membership in other statutory supervisory boards Nestlé Deutschland AG Bertelsmann Management SE and SE administrative boards in Germany Robert Bosch GmbH Bertelsmann SE & Co. KGaA Allianz Deutschland AG Deutsche Telekom AG JÜRGEN LAWRENZ Vonovia SE (Chairman) JEAN-JACQUES CETTE Employee of Allianz Technology SE (formerly named Chairman of the Group Works Council Allianz Managed Operations & Sevices SE) JIM HAGEMANN SNABE of Allianz France S.A. Membership in other statutory supervisory boards 1 Vice Chairman since 3 May 2017 Membership in comparable supervisory bodies and SE administrative boards in Germany Member of various Supervisory Boards Membership in Group bodies Membership in Group bodies Membership in other statutory supervisory boards Allianz France S.A. Allianz Technology SE (formerly named Allianz and SE administrative boards in Germany Managed Operations & Services SE) SAP SE DR. FRIEDRICH EICHINER until 30 June 2017 Member of various Supervisory Boards Siemens AG (Chairman since 31 January 2018) Membership in other statutory supervisory boards 1 Membership in comparable supervisory bodies and SE administrative boards in Germany A.P. Møller-Mærsk A/S (Chairman since Festo AG 28 March 2017) Membership in comparable1 supervisory bodies Bang & Olufsen A/S Festo Management AG until 13 September 2017

ROLF ZIMMERMANN Vice Chairman Chairman of the (European) SE Works Council of Allianz SE

1_Generally, we regard memberships in other supervisory bodies as “comparable” if the company is listed on a stock exchange or has more than 500 employees.

Annual Report 2017 – Allianz SE 7 A _ To Our Investors

MANDATES OF THE MEMBERS OF THE BOARD OF MANAGEMENT

OLIVER BÄTE NIRAN PEIRIS DR. DIETER WEMMER Chairman of the Board of Management since 1 January 2018 until 31 December 2017 Membership in other statutory supervisory boards Global Insurance Lines & Anglo Markets, Finance, Controlling, Risk and SE administrative boards in Germany Reinsurance, Middle East, Africa Membership in other statutory supervisory boards Membership in Group bodies Membership in comparable1 supervisory bodies and SE administrative boards in Germany Allianz Deutschland AG Membership in Group bodies Membership in Group bodies Allianz Australia Ltd. Allianz Asset Management AG since 1 January 2018 until 11 April 2017 SERGIO BALBINOT Allianz p.l.c. Allianz Investment Management SE Insurance Western & Southern Europe, since 10 January 2018 Membership in comparable1 supervisory bodies Asia Pacific UBS Group AG Insurance Middle East, Africa until 31 December 2017 GIULIO TERZARIOL Membership in comparable1 supervisory bodies since 1 January 2018 DR. WERNER ZEDELIUS Bajaj Allianz General Insurance Co. Ltd. Finance, Controlling, Risk until 31 December 2017 Bajaj Allianz Life Insurance Co. Ltd. Insurance German Speaking Countries and UniCredit S.p.A. Central & Eastern Europe Membership in Group bodies DR. GÜNTHER THALLINGER Membership in other statutory supervisory boards Allianz France S.A. Investment Management and SE administrative boards in Germany Allianz Sigorta A.S. Membership in other statutory supervisory boards FC Bayern München AG Allianz Yasam ve Emeklilik A.S. and SE administrative boards in Germany Membership in Group bodies Membership in Group bodies Allianz Deutschland AG (Chairman) Allianz Asset Management AG Allianz Investment Management SE JACQUELINE HUNT until 11 April 2017 Membership in comparable1 supervisory bodies Asset Management, US Life Insurance Allianz Investment Management SE (Chairman) Membership in Group bodies 1 Membership in comparable supervisory bodies Allianz Lebensversicherungs-AG Allianz Elementar Lebensversicherungs-AG (Chairman) Membership in Group bodies since 1 July 2017 Allianz Elementar Versicherungs-AG (Chairman) 1 Allianz Life Insurance Company of North America Membership in comparable supervisory bodies Allianz Investmentbank AG (Chairwoman) Membership in Group bodies Allianz Suisse Lebensversicherungs-Gesellschaft AG Allianz S.p.A Allianz Suisse Versicherungs-Gesellschaft AG DR. HELGA JUNG Allianz Tiriac Asigurari S.A. Insurance Iberia & Latin America, Legal, Compliance, DR. AXEL THEIS since 31 January 2017 Mergers & Acquisitions Global Insurance Lines & Anglo Markets Membership in other statutory supervisory boards until 31 December 2017 and SE administrative boards in Germany Insurance German Speaking Countries and Deutsche Telekom AG Central & Eastern Europe Membership in Group bodies since 1 January 2018 Allianz Asset Management AG (Chairwoman) Membership in other statutory supervisory boards until 11 April 2017 and SE administrative boards in Germany Allianz Deutschland AG ProCurand GmbH & KGaA (Chairman) Allianz Global Corporate & Specialty SE Membership in Group bodies Membership in comparable1 supervisory bodies Allianz Deutschland AG (Chairman) Membership in Group bodies since 1 January 2018 Allianz Compañía de Seguros y Reaseguros S.A. Allianz Investment Management SE Companhia de Seguros Allianz Portugal S.A. since 1 January 2018 Allianz Global Corporate & Specialty SE (Chairman) Membership in comparable1 supervisory bodies DR. CHRISTOF MASCHER Membership in Group bodies Operations, Allianz Partners Allianz Australia Ltd. Membership in other statutory supervisory boards until 31 December 2017 and SE administrative boards in Germany Allianz Insurance plc (Chairman) Volkswagen Autoversicherung AG until 31 December 2017 Membership in Group bodies Allianz Irish Life Holdings plc Allianz Technology SE (formerly named Allianz until 31 December 2017 Managed Operations & Services SE), Chairman Allianz Elementar Lebensversicherungs-AG (Chairman) 1 Membership in comparable supervisory bodies since 1 January 2018 Membership in Group bodies Allianz Elementar Versicherungs-AG (Chairman) Allianz Partners S.A.S. (formerly named Allianz since 1 January 2018 Worldwide Partners S.A.S.) Allianz Investmentbank AG since 28 November 2017 Allianz Suisse Lebensversicherungs-Gesellschaft AG since 30 November 2017 Allianz Suisse Versicherungs-Gesellschaft AG since 30 November 2017 Euler Hermes Group S.A. (Chairman)

1_Generally, we regard memberships in other supervisory bodies as “comparable” if the company is listed on a stock exchange or has more than 500 employees.

8 Annual Report 2017 – Allianz SE

MANAGEMENT REPORT OF ALLIANZ SE B

Annual Report 2017 – Allianz SE 9 Repor t B _ Management Report of Allianz SE

EXECUTIVE SUMMARY AND OUTLOOK

Earnings summary Natural catastrophes before retrocessions € mn

Losses for Allianz SE CONDENSED INCOME STATEMENT Major Events in 2017 € mn Hurricane Maria, Caribbean 46 2017 2016 Change Storm Xavier, Germany 36 Gross premiums written 10,265 10,820 (555) Storm Paul, Germany 33 Hurricane Irma, USA and Caribbean 32 Premiums earned (net) 9,433 9,625 (191) Storm Herwart, Germany and Poland 26 Claims (net) (6,262) (6,344) 82 Storm Kolle, Germany 20 Underwriting expenses (net) (2,884) (2,946) 62 Hailstorm in Australia 20 Other technical reserves (net) 52 65 (14) Wildfires in Portugal 18 Net underwriting result 339 400 (61) Cyclone Debbie, Australia 17 Change in claims equalization and similar Storm Rasmund, Germany 15 reserves (226) (528) 302 Hurricane Harvey, USA 14 Net technical result 113 (128) 241 Hailstorm in Germany 12 Investment result 3,713 3,290 423 Storm Thomas, Germany 11 Allocated interest return (22) (22) - Other 25 Other non-technical result (267) (459) 192 Total 325 Non-technical result 3,423 2,809 616

Net operating income 3,537 2,681 856 Losses for Allianz SE Taxes 135 267 (133) Net income 3,671 2,948 724 Major Events in 2016 Storms Lea, Marine and Neele, Germany 47 Earthquake in New Zealand 39 Storm Elvira, Germany 37 Storm Friederike, Germany 27 NET UNDERWRITING RESULT Hailstorm in the Netherlands 18 Gross premiums written decreased to € 10,265 mn, mainly due to a Floods in France 12 one-off effect in 2016 coming from the premium portfolio entries Other 36 performed for the new quota share agreements with European Total 216 Allianz entities. In total, € 9,858 mn (2016: € 10,385 mn) of gross premiums came from Property-Casualty reinsurance and € 407 mn

(2016: € 435 mn) from Life/Health reinsurance.

The net retention ratio decreased slightly to 92.4 % (2016: 92.7 %). The positive run-off result decreased from € 427 mn to € 343 mn and Premiums earned (net) declined by € 191 mn to € 9,433 mn (2016: was mainly influenced by the development of fire reinsurance € 9,625 mn), mainly driven by the development of gross premiums (€ 122 mn), engineering reinsurance (€ 103 mn), personal accident written and higher retrocessions. reinsurance (€ 49 mn) and credit and bond reinsurance (€ 48 mn). In The accident year loss ratio (net) in Property-Casualty reinsur- total, there was an increase of the loss ratio (net) in Property-Casualty ance dropped to 69.6 % (2016: 69.9 %). Natural catastrophe losses reinsurance to 65.8 % (2016: 65.3 %). 1 amounted to € 153 mn for the accident year 2017 (2016: € 216 mn) . The expense ratio (net) in Property-Casualty reinsurance de-

The decrease was mainly driven by the received retro compensation creased slightly to 30.7 % (2016: 31.0 %). This was largely driven by an for several natural catastrophe events with an amount of € 172 mn decrease of 0.3 percentage points in the commission ratio to 29.8 %

(2016: € 0 mn) in 2017. (2016: 30.1 %). The administrative expense ratio remains stable at

prior-year level of 0.9 % (2016: 0.9 %).

The net underwriting result reduced by 15.2 % from € 400 mn to € 339 mn, mainly because of the negative development of calendar year claims ratio in 2017 and the overall portfolio decline.

1_Based on Group definition for large losses.

10 Annual Report 2017 – Allianz SE B _ Management Report of Allianz SE

NET TECHNICAL RESULT Income from reversal of impairments fell by € 95 mn to € 10 mn, In 2017, a change in claims equalization and similar reserves of mainly stemming from write-ups related to our bond portfolio. € 226 mn (2016: € 528 mn) resulted from the positive underwriting Expenses for the management of investments, interest and oth- result as well as the overall portfolio growth of the last years. The er investment-related expenses were further reduced by € 13 mn to strengthening was mainly driven by other reinsurance lines € 1,093 mn. Despite an overall increase of financial liabilities, interest (€ 111 mn), credit and bond reinsurance (€ 53 mn), liability reinsur- expenses went down as a result of lower refinancing rates for the ance (€ 47 mn) and legal expenses reinsurance (€ 20 mn). On the rollover of matured debt instruments. other hand, there is a withdrawal due to exaggeration of loss for Depreciation and impairments of investments rose by € 84 mn motor reinsurance with an amount of € 26 mn. to € 267 mn. Much of the impairments in 2017 was attributable to Despite the further increase of equalization and similar reserves, our bond portfolio (€ 239 mn). the net technical result turned positive with € 113 mn (2016: € (128) mn). Realized losses went down by € 68 mn to € 131 mn, mainly re- sulting from the sale of bonds (€ 72 mn) and the redemption of intra- NON-TECHNICAL RESULT group debt at fair value prior to maturity (€ 31 mn). Expenses for losses taken over grew by € 137 mn to € 445 mn. INVESTMENT RESULT This was primarily due to higher losses taken over from our service € mn provider Allianz Technology SE, which increased by € 158 mn to 2017 2016 Change € 442 mn. Investment income Income from profit transfer agreements 3,026 1,943 1,082 OTHER NON-TECHNICAL RESULT Income from affiliated enterprises and The other non-technical result improved by € 192 mn to € (267) mn. participations 1,099 1,727 (628) Income from other investments 860 945 (85) This was primarily driven by the foreign currency translation result, Realized gains 653 365 288 which improved by € 640 mn. The increase of interest expenses on Income from reversal of impairments 10 105 (95) pensions by € 397 mn negatively influenced the result. For further Subtotal 5,648 5,085 563 information regarding other income and expenses, please refer to Investment expenses note 25. Expenses for the management of investments, interest and other investment- related expenses (1,093) (1,106) 13 TAXES AND NET INCOME Depreciation and impairments of As far as legally permissible, Allianz SE acts as the controlling com- investments (267) (183) (84) pany (“Organträger”) of the German tax group most German subsid- Realized losses (131) (198) 68 iaries belong to. As the controlling company, Allianz SE is liable for Expenses for losses taken over (445) (308) (137) the income taxes of this German tax group. Subtotal (1,935) (1,795) (139) After being offset against tax losses, the current tax charge Investment result 3,713 3,290 423 of Allianz SE amounted to € 393 mn (2016: € 257 mn). Moreover,

Allianz SE received a tax allocation of € 515 mn (2016: € 523 mn) by Allianz SE tax group companies that recorded taxable income. The investment result increased by € 423 mn to € 3,713 mn. Taking into account other taxes, the income from taxes amounted to Income from profit transfer agreements rose by € 1,082 mn to € 135 mn (2016: € 267 mn). € 3,026 mn, primarily due to a higher profit transfer from Allianz The increase of net income by € 724 mn to € 3,671 mn (2016: Deutschland AG, which went up by € 574 mn to € 1,423 mn, and a € 2,948 mn) is supported by all result components. The investment € 900 mn profit transfer from Allianz Argos 14 GmbH which reflects a result rose significantly by € 423 mn to € 3,713 mn, the net technical dividend payment received from Allianz Holding France SAS. This was result contributed with an upswing of € 241 mn to € 113 mn and the partly offset by lower profit transfers from Allianz Global Corporate & other non-technical result improved by € 192 mn to € (267) mn. Specialty SE and from Allianz Asset Management GmbH, which decreased by € 369 mn to € 331 mn and by € 24 mn to € 356 mn. 12 Income from affiliated enterprises and participations declined Economic outlook by € 628 mn to € 1,099 mn, mainly because the dividend payment received from our subsidiary Allianz Europe B.V. was reduced by Although political uncertainties linger, the global economic outlook

€ 750 mn to € 600 mn in 2017. for 2018 is favorable. The U.S. economy is expected to grow by 2.6 %. Income from other investments went down by € 85 mn to The recently adopted tax reform package should contribute to higher € 860 mn. It largely consits of interest income from intra-group loans growth. The net tax reductions will underpin companies' propensity to (€ 387 mn) and bonds (€ 315 mn). invest and support solid consumption growth. In the Eurozone, growth

Realized gains increased by € 288 mn to € 653 mn, mainly due is likely to exceed 2 % again in 2018. In particular, apart from the to the termination of intra-group loans in 2017 (€ 389 mn). Further favorable global backdrop, the fact that the loose European Central realized gains primarily resulted from the sale of bonds, which de- creased by € 116 mn to € 210 mn.

1_The information presented in the sections Economic outlook and Insurance industry outlook is based on our own estimates.

Annual Report 2017 – Allianz SE 11 B _ Management Report of Allianz SE

Bank monetary policy continues to provide support, coupled with over Africa to Asia, should continue their recovery; in Emerging Asia, broadly neutral fiscal policy, points to an ongoing recovery. As in premium growth could top 10 %. In contrast, growth in advanced

2017, the emerging market economies are expected to grow by close markets will be much slower, at around 3 %. Overall, we expect global to 5 %. Asian emerging markets continue to benefit from the revival of premium growth of about 5 % in 2018 (in nominal terms and adjusted world trade and stable growth in China. The Eastern European coun- for foreign currency translation effects). Assuming average losses tries capitalize on the continuing upturn in the Eurozone. We are from natural catastrophes and more positive rate dynamics – particu- currently faced with a rather high degree of synchronization, and for larly in business lines affected by last year’s losses – overall profitabil- the world economy it is the strongest expansion period since 2011. ity is likely to increase, although investment income might remain a

Global output is expected to increase by 3.2 % in 2018. drag. The uncertain global political environment bears the potential In the life sector, the overall picture is quite similar – with one ex- for higher financial market volatility. Monetary policy also contributes ception: The growth lead of Emerging Asia over the rest of the world to this. As the U.S. economy is expected to expand solidly and infla- is even more pronounced. While the advanced markets’ recovery tion rates continue to move up, the Federal Reserve will carry on proceeds at a snail’s pace and other emerging markets show robust normalizing its monetary policy stance. Three further rate hikes in the but more or less stable growth, many of Asia’s emerging markets are course of 2018 look realistic. In addition, the Federal Reserve will rein expected to clock growth rates of 15 % or more. A rising middle class, in its balance sheet moderately. In the Eurozone, the European Cen- urbanization, aging societies, and last but not least a favorable policy tral Bank is expected to terminate its monthly bond purchasing pro- environment underpin the continued growth story. Overall, we expect gram in October, having halved the monthly volume to € 30 bn as of global premium growth to increase by about 6 % in 2018 (in nominal January 2018. No key interest rate hikes are expected before 2019. terms and adjusted for foreign currency translation effects) compared Modestly rising yields on 10-year U.S. government bonds, the good to 2017. Global industry profitability could also improve in 2018, economic situation in the Eurozone, and gradually rising inflation albeit only modestly. This change for the better has not so much to do rates are likely to influence investors´ interest rate expectations and with the slight rise in interest rates; it is mainly a result of recent man- exert upward pressure on European benchmark bond yields. For 10- agement actions which steered insurance portfolios towards less year German government bonds, we see yields climbing modestly to capital intensive business lines (such as protection) and investment about 1 % in the course of 2018; yields on 10-year U.S. government portfolios towards riskier but higher-yielding asset classes (such as bonds may end the year at close to 3 %. While the ongoing Federal infrastructure). Reserve rate-hiking cycle will weigh on the Euro, a number of other factors will support it, among them the solid recovery in the Eurozone. We expect the Dollar-to-Euro exchange rate to close the year at Business outlook about 1.15 (2017: 1.20). Our outlook assumes no significant deviations from the following underlying assumptions: Insurance industry outlook − Global economic growth is set to continue. The insurance industry can look towards 2018 with some optimism, − Modest rise in interest rates expected. mainly for three reasons: Firstly, premium growth is set to increase as − No major disruptions of capital markets. the stronger economic momentum bolsters demand for insurance. − No disruptive fiscal or regulatory interference. Secondly, the expected gradual rise in interest rates and yields can be − Level of claims from natural catastrophes at expected average seen as the harbinger of the end of the long and cold “yield winter”, levels. although it will still take some time until higher yields are reflected in − Average U.S. Dollar to Euro exchange rate of 1.22. higher investment incomes. Finally, after the increase in financial regu- lation in recent years, the insurance industry might enjoy a sort of Allianz SE provides a wide range of reinsurance coverage, primarily respite in 2018, a breathing space for better coping with the new rules. to Allianz insurance entities (group-internal business), but also to However, even if the macroeconomic and regulatory environ- third-party customers (external business). This includes Property- ment looks more favorable in 2018, it is by no means plain sailing for Casualty as well as Life/Health business on both a proportional and a the insurance industry. New technologies, from digitalization to Artifi- non-proportional basis. Due to the broad spread of exposures un- cial Intelligence, continue to change the industry profoundly: Business derwritten by types of business and geography, Allianz SE’s portfolio models need to be transformed, new skills to be learned, new part- is well diversified. nerships to be built and new competition to be fended off. Further- Allianz SE and its subsidiaries (the Allianz Group) use Allianz SE, more, the ongoing digitalization of our lives will usher in a new era of in particular, as a vehicle for actively managing their overall exposure regulation, governing the use of data – the oil of the 21st century. On to natural catastrophes. Within a group-wide risk management the other hand, the upsides of the new technologies, in particular in framework, each operating entity is responsible for controlling its terms of simplicity and accessibility, should become more visible in exposure to individual catastrophes and defining its local reinsurance 2018, too. requirements, based on its local risk appetite and capital position. In the property-casualty sector, premium growth is expected to The respective cover is then provided by Allianz SE or one of its sub- accelerate in 2018, reflecting higher inflation and the ongoing broad- sidiaries. At the Group level, the Allianz SE Board reviews and ap- based recovery of the global economy. As in previous years, emerging proves the risk appetite. The reinsurance division is then responsible markets are the main driver of growth: All regions, from Latin America for designing and implementing Group catastrophe protections

12 Annual Report 2017 – Allianz SE B _ Management Report of Allianz SE

within given exposure limits. These covers take various forms and aim offset by an declined other non-technical result. On the other hand, to protect the Group against excessive losses from major natural we estimate a better tax income. We are not currently planning a catastrophes. However, there is still the potential for an unexpected specific currency rate result, nor are we able to anticipate any net frequency and/or severity of catastrophic events in any year that may gains/losses from derivatives. This could impact the net income of materially impact the results of Allianz SE. The top five residual risk Allianz SE considerably. Given the susceptibility of our non-technical exposures at the Group level are summarized on page 28. result to adverse capital market developments, we do not provide a After five years of falling rates the softening reinsurance cycle precise outlook for net income. Nevertheless, we are ultimately has come to an end for the January 2018 renewals, mainly a result of planning and managing the Allianz SE net earnings in line with the claims burden due to Natural Catastrophes in 2017. As there is still Allianz Group’s dividend policy. To this end, we take advantage of the plenty of capacity in the reinsurance market it remains to be seen if opportunity to make targeted use of the dividends of our subsidiaries, this development will continue in 2018. in particular those of Allianz Europe B.V., in order to generate net Allianz SE’s technical result largely depends on group-internal earnings for Allianz SE that match the dividend policy of cessions resulting from the quota share agreements with European Allianz Group. For more detailed information on our dividend policy, Allianz entities. We expect an increase of net premiums as well as an see the Allianz Group’s Annual Report 2017 and improvement of the net underwriting result before equalization re- www.allianz.com/dividend. serve in 2018. Based on our estimates we expect an improved com- bined ratio for the property and casualty reinsurance in 2018. It should be noted that, in extreme cases, the actual result may vary Management’s overall assessment of the current significantly as the reinsurance business is, by nature, volatile in terms economic situation of Allianz SE of frequency and severity of losses. For 2018, we predict an almost stable net income and, together Overall, at the date of issuance of this Annual Report and given with the unappropriated earnings carried forward, an increase in net current information regarding natural catastrophes and capital mar- earnings. Based on our current planning, this may involve a year-on- ket trends – in particular foreign currency, interest rates, and equities year shift in earning contributions between the investment result and – the Board of Management has no indication that Allianz SE is the other non-technical result. We currently expect a rising investment facing any major adverse developments. result. However, as things stand, this increase is set to be more than

Cautionary note regarding forward-looking statements The statements contained herein may include prospects, statements of future expectations, and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties. Actual results, performance, or events may differ materially from those expressed or implied in such forward-looking statements. Such deviations may arise due to, without limitation, (i) changes of the general economic conditions and competitive situation, particularly in the ­Allianz Group’s core business and core markets, (ii) performance of financial markets (particularly market volatility, liquidity and credit events), (iii) frequency and severity of insured loss events, including natural catas­trophes, and the development of loss expenses, (iv) mortality and morbidity levels and trends, (v) persistency levels, (vi) particularly in the banking business, the extent of credit defaults, (vii) interest rate levels, (viii) currency exchange rates, including the Euro/U.S. Dollar exchange rate, (ix) changes in laws and regulations, including tax regulations, (x) the impact of acquisitions, including related integration issues and reorganization measures, and (xi) general competitive factors, in each case on a local, regional, national, and/or global basis. Many of these factors may be more likely to occur, or more pronounced, as a result of terrorist activities and their consequences.

No duty to update The company assumes no obligation to update any information or forward-looking statement contained herein, save for any information required to be disclosed by law.

Annual Report 2017 – Allianz SE 13 B _ Management Report of Allianz SE

OPERATIONS BY REINSURANCE LINES OF BUSINESS

Gross premiums written decreased by 5.1 % to € 10,265 mn (2016: Allianz SE continued to write business from selected external partners

€ 10,820 mn). All in all, 91.9 % (2016: 92.6 %) of premiums written in order to diversify the internal portfolio. originated from the Allianz Group’s internal business. In addition,

Gross premiums written and net technical result by reinsurance lines of business

Combined ratio Change in claims equalization Gross premiums written Property-Casuality and similar reserves Net technical result 2017 2016 Change 2017 2016 2017 2016 2017 2016 € mn € mn %1 % % € mn € mn € mn € mn Motor 3,780 4,062 (6.9) 104.4 104.1 26 (106) (151) (276) Fire and property reinsurance 2,687 2,817 (4.6) 89.7 88.2 (11) (183) 243 92 thereof: Household and homeowner 865 839 3.2 96.1 88.0 - - 33 95 Fire 680 810 (16.1) 94.2 78.2 (11) (183) 22 (59) Engineering 412 441 (6.6) 63.7 88.7 - - 145 48 Business interruption 160 83 91.2 99.0 87.8 - - 1 10 Other property reinsurance 569 644 (11.6) 92.7 98.8 - - 42 (2) Liability 1,206 1,270 (5.0) 93.5 94.6 (48) (45) 33 16 Credit and bond 445 382 16.4 96.7 93.3 (53) (43) (43) (17) Personal accident 365 354 3.1 77.7 79.3 (1) (1) 77 68 Life 302 319 (5.3) n/a n/a - - 31 89 Marine and aviation 297 357 (16.7) 94.1 94.8 (8) (27) 7 (9) Legal expenses 245 237 3.6 91.4 98.3 (20) (1) 1 3 Health 105 116 (8.9) n/a n/a - - (1) 1 Other lines 832 906 (8.2) 96.4 96.5 (111) (122) (84) (95) Total 10,265 10,820 (5.1) 96.6 96.3 (226) (528) 113 (128)

1_For lines of business on the basis of the accurate, non-rounded amount.

Premiums written in motor reinsurance fell by 6.9 % to € 3,780 mn The combined ratio improved significantly to 63.7 % (2016: 88.7 %), (2016: € 4,062 mn), mainly impacted by the decrease of premium much of which was driven by the positive development of the acci- volume from Allianz S.p.A. The combined ratio rose to 104.4 % (2016: dent year claims ratio of 58.5 % (2016: 80.6 %). The net technical result

104.1 %), mainly driven by the increased calendar year loss ratio of increased by € 97 mn to € 145 mn (2016: € 48 mn).

78.1 % (2016: 75.4 %), with offsetting effects coming from the reduced Other property reinsurance includes extended coverage for fire expense ratio of 26.3 % (2016: 28.8 %). In particular, the claims devel- and business interruption as well as hail, storm, water damage, live- opment caused a release of equalization reserve in the amount of stock, burglary, and glass reinsurance. Premiums written declined by

€ (26) mn (2016: strengthening € 106 mn). 11.6 % to € 569 mn (2016: € 644 mn) due to reduced external business The household and homeowner reinsurance portfolio increased volume. The net technical result improved significantly to € 42 mn slightly by 3.2 %, with gross premiums written of € 865 mn (2016: (2016: € (2) mn), mainly driven by the positive development of acci-

€ 839 mn), mainly coming from the business with Allianz Versicher- dent year loss ratio 65.3 % (2016: 71.5 %). ungs-AG. Driven by a deteriorated accident year claims ratio of 65.2 % Premiums written for liability reinsurance declined by 5.0 % to

(2016: 57.8 %) and a negative run-off result of € (5) mn (2016: € 9 mn), € 1,206 mn (2016: € 1,270 mn), much of which resulted from a de- the combined ratio worsened to 96.1 % (2016: 88.0 %). The net tech- crease of premium revenue with Allianz Global Corporate & Specialty nical result decreased to € 33 mn (2016: € 95 mn). SE. The combined ratio improved to 93.5 % (2016: 94.6 %), mainly

The fire reinsurance portfolio declined by 16.1 % to € 680 mn influenced by the positive development of accident year loss ratio

(2016: € 810 mn) in gross premiums written, driven by internal busi- 57.0 % (2016: 59.3 %) which was partially offset by the negative run- ness. The increase of accident year claims ratio to 89.2 % (2016: off result of € (44) mn (2016: € (33) mn). The net technical result

81.8 %) and the decrease of run-off result to € 122 mn (2016: amounted to € 33 mn (2016: € 16 mn), after a further strengthening € 180 mn) caused a significant increase of the calendar year claims of the equalization reserve of € 48 mn (2016: € 45 mn). ratio to 67.1 % (2016: 50.3 %). The combined ratio deteriorated to Gross premiums written in credit and bond reinsurance in-

94.2 % (2016: 78.2 %). After a further strengthening of the equalization creased by € 63 mn to € 445 mn. The calendar year loss ratio im- reserve of € 11 mn (2016: € 183 mn), a positve net technical result of proved by 3,6 % to 49.7 % which was mainly influenced by the in- € 22 mn (2016: € (59) mn) was achieved. creased run-off result of € 48 mn (2016: € 20 mn). However, the

Engineering reinsurance premiums written decreased to combined ratio worsened to 96.7 % (2016: 93.3 %), influenced by a

€ 412 mn (2016: € 441 mn), mainly resulting from the shift to more higher expense ratio of 47.0 % (2016: 40.0 %). A further strengthening non-proportional reinsurance covers for several business partners.

14 Annual Report 2017 – Allianz SE B _ Management Report of Allianz SE

of the equalization reserve of € 53 mn (2016: € 43 mn) led to a nega- The premium revenue of legal expenses reinsurance rose by 3.6 % to tive net technical result of € (43) mn (2016: € (17) mn). € 245 mn (2016: € 237 mn), largely driven by business with Allianz Versicherungs-AG. The combined ratio improved substantially to

The gross premium written in marine and aviation reinsurance fell by 91.4 % (2016: 98.3 %). This positive development was mainly attribut-

16.7 % to € 297 mn (2016: € 357 mn), mainly impacted by a decrease able to higher run-off result of € 24 mn (2016: € 16 mn) reflected in of premium revenue with Allianz Global Corporate & Specialty SE. an improved calendar year losses ratio of 54.4 % (2016: 61.8 %). After The combined ratio improved slightly by 0.7 percentage points to a strengthening of equalization reserve with an amount of € 20 mn

94.1 %, mainly due to the increased run-off result of € 33 mn (2016: (2016: € 1 mn), the net technical result remained positive with € 1 mn € 10 mn). This development caused a strengthening of € 8 mn (2016: (2016: € 3 mn). € 27 mn) in equalization reserve. As a consequence of the decreased allocation to the equalization reserve, the net technical result turned Other reinsurance lines include: positive with € 7 mn (2016: € (9) mn). The personal accident reinsurance gross premium revenue in- − emergency assistance, creased to € 365 mn (2016: € 354 mn), mainly driven by higher pre- − fidelity & political risk, miums ceded by Allianz Versicherungs-AG. The combined ratio fur- − motor extended warranty, ther improved to 77.7 % (2016: 79.3 %), mainly influenced by a lower − other property and casualty business. accident year claims ratio of 57.3 % (2016: 58.9 %). After a strengthen- ing of € 1 mn in equalization reserve (2016: € 1 mn), an increased net technical result of € 77 mn (2016: € 68 mn) was achieved. In life reinsurance, the premium revenue declined to € 302 mn (2016: € 319 mn), primarily due to the recapture of several reinsur- ance contracts in the Asia-Pacific region. The expense ratio increased by 10.8 percentage points, compared to the previous year, reaching

28.6 %, much of the difference being due to one-off effects in 2016. The net technical result dropped to € 31 mn (2016: € 89 mn).

Annual Report 2017 – Allianz SE 15 B _ Management Report of Allianz SE

BALANCE SHEET REVIEW

Condensed balance sheet The book value of investments in affiliated enterprises and partici- pations increased by € 2.8 bn to € 74.2 bn, driven by a higher book € mn value of shares in affiliated enterprises (€ 5.6 bn). A reduction of as of 31 December 2017 2016 loans to affiliated enterprises (€ 2.8 bn) partly offset this increase. More details regarding this position are explained in note 5 to our ASSETS financial statements. Intangible assets 30 21 Investments 116,061 113,079 Other investments slightly decreased from € 33.4 bn to Receivables 5,398 5,473 € 33.3 bn, reflecting declines in investment funds (€ 0.7 bn), loans Other assets 272 292 (€ 0.2 bn), and deposits with banks (€ 0.2 bn), which mostly were Deferred charges and prepaid expenses 307 615 compensated by higher investments in debt securities (€ 1.0 bn). Excess of plan assets over pension and similar obligations 11 - At the end of 2017, € 28.4 bn of other investments were invested Total assets 122,080 119,480 in debt securities, of which € 9.6 bn were government bonds. We slightly raised our overall government bond exposure by € 0.1 bn EQUITY AND LIABILITIES compared to year-end 2016, reducing our sovereign debt exposure in Shareholders’ equity 42,014 44,650

Subordinated liabilities 13,689 13,806 Spain from € 0.7 bn to € 0.6 bn while increasing our investments in Insurance reserves net 14,980 14,471 Italian government bonds from € 0.6 bn to € 0.8 bn. Other provisions 7,950 7,369 Funds held by others under reinsurance business assumed in- Funds held with reinsurance business ceded 983 1,075 creased to € 8.3 bn (2016: € 8.0 bn). This increase reflects the devel- Payables on reinsurance business 363 411 opment of reserves for loss and loss adjustment expenses. Other financial liabilities 42,090 37,691 As of 31 December 2017, the fair value of investments amounted Deferred income 11 7 to € 127.1 bn (2016: € 124.9 bn), compared to a carrying amount of Total equity and liabilities 122,080 119,480 € 116.1 bn (2016: € 113.1 bn).

Shareholders’ equity Investments As of 31 December 2017, our shareholders’ equity amounted to € mn € 42.0 bn (2016: € 44.7 bn), a decrease of € 2.7 bn in the financial as of 31 December 2017 2016 year. The reduction is caused by a buy-back of own shares at acquisi- Real estate 245 250 tion costs of € 3.0 bn. The shares were cancelled without reducting Investments in affiliated enterprises and participations 74,176 71,354 the issued capital. This decrease was partly offset by a slight rise of Other investments 33,329 33,447 € 0.3 bn, due to net income being higher than the dividend paid and Funds held by others under reinsurance business assumed 8,310 8,028 due to the sale of own shares for the Employee Stock Purchase Plan. Total investments 116,061 113,079 The Board of Management proposes to use the net earnings of

€ 4,117 mn for dividend payments in the amount of € 3,511 mn.1 The unappropriated earnings of € 606 mn will be carried forward.

Development of shareholders’ equity and of issued shares

Mathematical value of own Additional Issued shares Issued capital shares paid-in capital Revenue reserves Net earnings 31 December Number € thou € thou € thou € thou € thou € thou as of 31 December 2016 457,000,000 1,169,920 (4,945) 27,844,664 11,784,157 3,855,866 44,649,662 Own shares: cancellation (16,750,354) - - - (2,997,705) - (2,997,705) Own shares - - 1,307 - 38,566 - 39,873 Own shares: realized gains - - - 60,592 - - 60,592 Dividend payment for 2016 - - - - - (3,409,946) (3,409,946) Unappropriated earnings carried forward - - - - - (445,920) (445,920) Net earnings - - - - - 4,117,339 4,117,339 as of 31 December 2017 440,249,646 1,169,920 (3,638) 27,905,256 8,825,017 4,117,339 42,013,894

1_The proposal reflects the number of shares entitled to the dividend as of 31 December 2017.

16 Annual Report 2017 – Allianz SE B _ Management Report of Allianz SE

Insurance reserves and other provisions Liabilities from bonds issued to Group companies declined to € 2.4 bn (2016: € 2.6 bn), due to the redemption of bonds in the For information on insurance reserves and other provisions, please amount of € 0.2 bn. refer to notes 14 and 15 to our financial statements. Liabilities to banks went down to € 0.0 bn (2016: € 0.4 bn) fol- lowing the termination of short-term repurchase agreements amounting to € 0.4 bn. Financial liabilities Other intra-group financial liabilities rose to € 38.4 bn (2016: € 33.4 bn) and were composed of the following positions: As of 31 December 2017, Allianz SE had the following outstanding financial liabilities: Other intra-group financial liabilities € mn

Financial liabilities as of 31 December 2017 2016 € mn Intra-group loans 23,292 23,317 as of 31 December 2017 2016 Cash pool liabilities 13,981 9,272 Intra-group subordinated liabilities 3,412 4,869 Miscellaneous 1,124 840 Third-party subordinated liabilities 10,277 8,937 Other intra-group financial liabilities 38,397 33,429 Subordinated liabilities 13,689 13,806

Bonds issued to Group companies 2,354 2,576 Liabilities to banks - 398 While liabilities from intra-group loans remained stable at € 23.3 bn, Other intra-group financial liabilities 38,397 33,429 liabilities from intra-group cash pooling significantly increased by Other third-party financial liabilities 1,338 1,288 € 4.7 bn to € 14.0 bn and miscellaneous intra-group liabilities Other financial liabilities 42,090 37,691 climbed by € 0.3 bn to € 1.1 bn. Total financial liabilities 55,779 51,497 In 2017, other third-party financial liabilities amounted to € 1.3 bn (2016: € 1.3 bn). The decline of short-term funding through European commercial papers by € 0.1 bn to € 0.9 bn was offset by an Of these financial liabilities, € 44.2 bn (2016: € 40.9 bn) were intra- increase of various other third-party financial liabilities by € 0.1 bn to group liabilities. € 0.4 bn. Subordinated liabilities decreased to € 13.7 bn (2016: € 13.8 bn). Details regarding this position are explained in note 13 to our financial statements.

Annual Report 2017 – Allianz SE 17 B _ Management Report of Allianz SE

LIQUIDITY AND FUNDING RESOURCES

The responsibility for managing the funding needs of the Group, as Allianz SE has the option to increase its equity capital base ac- well as for maximizing access to liquidity sources and minimizing cording to authorizations provided by the AGM. The following table borrowing costs, lies with Allianz SE. outlines Allianz SE’s capital authorizations as of 31 December 2017:

Capital authorizations of Allianz SE

Liquidity Resources and Uses Expiry date of Capital authorization Nominal amount the authorization Allianz SE ensures adequate access to liquidity and capital for our Authorized Capital € 550,000,000 6 May 2019 operating subsidiaries. Main sources of liquidity available to 2014/I Authorized Capital € 13,720,000 6 May 2019 Allianz SE are dividends and funds received from subsidiaries, 2014/II reinsurance premiums received, and funding provided by capital Authorization to issue bonds € 10,000,000,000 6 May 2019 markets. Liquidity resources are defined as readily available assets – carrying conversion and/or (nominal bond value) (issuance of bonds) option rights specifically cash, money market investments, and highly liquid Conditional Capital € 250,000,000 No expiry date for Conditional government bonds. Funds are primarily used for paying interest 2010/2014 Capital 2010/2014 (issuance in case option or conversion expenses on our debt funding, claims arising from the reinsurance rights are exercised) business, operating costs, internal and external growth investments, and dividends to our shareholders.

For further details on Allianz SE’s capital authorizations, please refer Funding Sources to note 12 to our financial statements.

Allianz SE’s access to external funds depends on various factors such DEBT FUNDING as capital market conditions, access to credit facilities as well as credit The cost and availability of debt funding may be negatively affected ratings and credit capacity. The financial resources available to by general market conditions or by matters specific to the financial Allianz SE are both equity and debt funding. Equity can be raised by services industry or to Allianz SE. Our main sources of debt funding issuing ordinary shares. The issuance of debt in various maturities as are senior and subordinated bonds. Among others, money market well as group-wide liquidity management are the main sources of our securities, letter-of-credit facilities and bank credit lines allow debt funding. Allianz SE to fine-tune its capital structure. In 2017, we had steady access to debt funding sources, enabling EQUITY FUNDING us to actively steer the maturity profile of our funding structure. In As of 31 December 2017, the issued capital registered at the Com- January 2017, Allianz SE issued two dated subordinated bonds of mercial Register was € 1,169,920,000. This was divided into 440,249,646 € 1.0 bn and USD 0.6 bn and redeemed a subordinated bond of registered shares with restricted transferability. As of 31 December 2017, € 1.4 bn in February 2017. Overall, our subordinated liabilities de-

Allianz SE held 1,369,131 (2016: 1,931,677) own shares. creased slightly to € 13.7 bn (2016: € 13.8 bn) at year-end. Other financial liabilities increased to € 42.1 bn (2016: € 37.7 bn), mainly as a result of higher intra-group liabilities. For further details on Allianz SE’s financial liabilities, please refer to notes 13 and 16 to our financial statements.

18 Annual Report 2017 – Allianz SE B _ Management Report of Allianz SE

RISK AND OPPORTUNITY REPORT

Target and strategy of risk management positive impact on valuation and financing. It also strengthens the risk awareness and risk culture throughout Allianz SE. Allianz SE aims to ensure adequate capitalization at all times for the benefit of both shareholders and policyholders. This includes meeting MANAGEMENT STRUCTURE the Solvency II regulatory capital requirements resulting from the internal model. Furthermore, risk and the cost of capital – reflecting SUPERVISORY BOARD RISK COMMITTEE AND GROUP that risk – are important aspects to be taken into account in business FINANCE AND RISK COMMITTEE decisions. Allianz SE’s risk governance ensures that our risk profile remains We closely monitor the capital position and risk concentrations consistent with both our risk strategy and our capacity to bear risks. of Allianz SE and apply regular stress tests (standardized and histori- Within our risk governance system, the Supervisory Board and the cal stress test scenarios). This allows us to take appropriate measures Board of Management of Allianz SE have both Allianz SE and Group- to ensure our continued capital and solvency strength. wide responsibilities. The Board of Management formulates business objectives and a corresponding risk strategy; the core elements of the risk framework are set out in the Allianz Group Risk Policy approved Risk governance by the Board of Management, which also serves as the master risk policy for Allianz SE. The Supervisory Board advises, challenges, and RISK MANAGEMENT FRAMEWORK supervises the Board of Management in the performance of its man- As the holding company of Allianz Group and a global reinsurer, we agement activities. The following committees support the Board and consider risk management to be a core competency and an integral the Supervisory Board on risk issues. part of our business. Our risk management framework covers all operations and business units of Allianz SE, proportional to the Supervisory Board Risk Committee inherent risks of the activities, ensuring that risks across the legal The Risk Committee of the Supervisory Board monitors the effective- entity are consistently identified, analyzed, assessed and managed. ness of Allianz SE’s risk management framework. It also keeps track The primary goals of our risk management framework are: of risk-related developments as well as of general risks and specific risk exposures. − Promotion of a strong risk culture, supported by a robust risk governance structure. Group Finance and Risk Committee − Consistent application of an integrated risk capital framework to The Group Finance and Risk Committee (GFRC) provides oversight of protect our capital base and to support effective capital man- the Group’s and Allianz SE’s risk management framework, acting as a agement. primary early-warning function in that it monitors the Group’s and − Integration of risk considerations and capital needs into man- Allianz SE’s risk profiles as well as the availability of capital. The agement and decisions by attributing risk and allocating capital GFRC also ensures that an adequate relationship between return to the business units. and risk is maintained. Additionally, the GFRC defines risk standards, forms the limit-setting authority within the framework set by the Our risk management system is based on the following four pillars: Board of Management, and approves major financing and reinsur- Risk identification and underwriting: Risk identification and un- ance transactions. Finally, the GFRC supports the Board of Manage- derwriting forms the foundation for adequate risk and management ment with recommendations regarding capital structure, capital decisions. Supporting activities include standards for underwriting, allocation and investment strategy, including the strategic asset valuation methods, individual transaction approvals, emerging- allocation. /operational-/top-risk assessments, and scenario analyses. The GFRC is supported by the Allianz Re Risk Committee on top- Risk strategy and risk appetite: Our risk strategy defines our risk ics relating to the reinsurance business of Allianz SE. appetite consistent with our business strategy. It ensures that rewards are appropriate based on the risks taken and capital required, and OVERALL RISK ORGANIZATION AND ROLES IN RISK that the delegated authorities are in line with our overall risk-bearing MANAGEMENT capacity and strategy. A comprehensive system of risk governance is achieved by setting Risk reporting and monitoring: Our comprehensive qualitative standards related to the organizational structure, the risk strategy and quantitative risk monitoring framework provides management and appetite, limit systems, documentation, and reporting. These with the transparency needed to assess whether our risk profile falls standards ensure the accurate and timely flow of information and a within delegated limits and to identify emerging issues quickly. For disciplined approach towards decision-making and execution. example, risk dashboards and limit consumption reports as well as As a general principle, the “first line of defense” rests with busi- scenario analyses and stress tests are regularly prepared and com- ness managers in the business units of Allianz SE. They are responsi- municated. ble for both the risks and returns from their decisions. Our “second line Communication and transparency: Transparent risk disclosure of defense” is made up of independent oversight functions including provides the basis for communicating our strategy and performance risk, actuarial, compliance, and legal, which support the Board in to internal and external stakeholders, ensuring a sustainable and defining the risk framework within which the business can operate.

Annual Report 2017 – Allianz SE 19 B _ Management Report of Allianz SE

Audit forms the “third line of defense”, independently reviewing analysis: Risk and concentrations are actively restricted by limits Allianz SE’s risk governance implementation and compliance with risk based on our model, and there is a comprehensive analysis of the principles. It performs quality reviews of risk processes, and tests return on risk capital (RoRC) in the underwriting of property and adherence to business standards, including the internal control casualty reinsurance business. The RoRC allows us to identify profita- framework .For the first and the second line of defense, Allianz SE has ble lines of business on a sustainable basis, and thus is a key criterion established dedicated responsibilities at its departments (including for capital allocation decisions. reinsurance). As a consequence, the internal model is fully integrated in busi- ness steering, and the application of the internal model satisfies the Risk Function so-called “use-test” under Solvency II. The functions of Chief Risk Officer for the Allianz Group and for Allianz SE are performed by the same person. Independent risk MARKET RISK oversight for Allianz SE is performed by risk control entities within As the holding company of Allianz Group and a global reinsurer, Group Risk and the reinsurance department of Allianz SE. Allianz SE holds and uses a broad range of financial instruments, which are reflected on our balance sheet as both assets and liabili- Other functions and bodies ties. In addition to the risk function for Allianz SE, Allianz SE’s legal, com- For our holding activities (i.e. to hold participations, provide fi- pliance and actuarial functions constitute additional components of nancing for Group companies, cover internal pension liabilities, invest the “second line of defense”. cash pooled from subsidiaries, and as the lender of last resort within Allianz SE’s legal and compliance functions seek to mitigate le- Allianz Group), Allianz SE predominantly invests in participations and gal risks for Allianz SE with support from other departments. The fixed-income assets. As an inherent part of our reinsurance opera- objectives of these functions are to ensure that laws and regulations tions, we collect premiums from our customers and invest them in a are observed, to react appropriately to all impending legislative wide variety of assets. The resulting reinsurance investment portfolio changes or new court rulings, to attend to legal disputes and litiga- backs the future claims of and benefits to our cedents. In addition, we tion, and to provide legally appropriate solutions for transactions and invest shareholders’ capital, which is required to support the under- business processes. In addition, compliance is responsible for integrity written risks and the holding activities. Our market risk from liabilities management, which aims to protect Allianz SE and employees from primarily relates to fixed-income instruments held for financing, as regulatory risks. well as to internal pensions and reinsurance liabilities. Finally, we use The Allianz SE actuarial function contributes towards assessing derivatives for various purposes, especially to hedge our planned and managing risks in line with regulatory requirements, in particular dividend income from non-Euro subsidiaries against adverse currency for those risks whose management requires actuarial expertise. The market movements. Financial market asset/liability management range of tasks includes, among others, the calculation and monitor- decisions are taken based on the internal model, balancing risks ing of technical provisions, technical actuarial assistance in business against returns. planning, reporting and monitoring of the results, and supporting the As the fair values of our assets and liabilities depend on financial effective implementation of the risk management system. markets, which may change over time, we are exposed to the risk of adverse financial market developments. Allianz SE’s most important market risk results from changes in the value of its participations in Risk based steering and risk management Group companies. The long-dated internal pension liabilities of Ger- man Group companies on Allianz SE’s balance sheet contribute to Allianz SE is exposed to a variety of risks through its holding company interest rate risk, in particular as they cannot be fully matched by and reinsurance activities, including market, credit, underwriting, available investments due to long maturities. In addition, we are also business, operational, strategic, liquidity, and reputational risks. exposed to adverse changes in equity and real estate prices, credit Allianz SE considers diversification across different lines of busi- spread levels, inflation, implied volatilities, and currency values, which ness and geographic regions to be a key element in managing our might impact the value of our assets and liabilities. risks efficiently, limiting the economic impact of any single event and To measure these market risks, real world stochastic models for contributing to relatively stable results. Our aim is to maintain a bal- the relevant risk factors, calibrated using historical time series, are anced risk profile without any disproportionately large risk concentra- used to generate possible future market developments. After the tions and accumulations. scenarios for all risk factors are generated, the asset and liability With Solvency II being the binding regulatory regime for positions are revalued under each scenario. The worst-case outcome Allianz SE since 1 January 2016, our risk profile is measured and of the portfolio profit and loss distribution at a certain confidence steered based on our approved Solvency II internal model. We have level (99.5 %) defines the market Value at Risk (VaR). introduced a target Solvency II ratio for Allianz SE based on prede- Market risk from material M&A transactions of Allianz SE is fined shock-scenarios, which is supplemented by sensitivity analysis. managed by assessing risk capital implications. Strategic asset allo- In addition, central elements of Allianz SE’s dividend policy are cation benchmarks are defined for several sub-portfolios of the in- linked to the Solvency II capitalization based on our internal model. vestment portfolio of Allianz SE. Furthermore, we have risk limits in By that we allow for a consistent view on risk steering and capitaliza- place, including financial VaR, stand-alone interest rate and equity tion under the Solvency II framework. sensitivity limits, and foreign-exchange exposure limits. Limits are Allianz SE steers its portfolio using a comprehensive view of risk closely monitored and, if a breach occurs, countermeasures are im- and return based on the internal risk model which includes scenario plemented. These may include the escalation and/or closing of posi-

20 Annual Report 2017 – Allianz SE B _ Management Report of Allianz SE

tions. Finally, guidelines are in place regarding certain investments, An additional important source of currency risk is the planned divi- new investment products, and the use of derivatives. dend income from non-Euro subsidiaries. Allianz SE’s currency risk is managed based on our foreign- EQUITY RISK exchange management limit framework. Allianz SE’s equity risk predominantly results from the performance of our insurance participations. Other material risk exposures reflect CREDIT RISK listed and unlisted equities, equity derivatives, own shares, and man- Credit risk is measured as the potential economic loss in the value of agement incentive plans. our portfolio that is due to changes in the credit quality of our coun- Risks from changes in equity prices are normally associated with terparties (“migration risk”) or the inability or unwillingness of a coun- decreasing share prices and increasing equity price volatilities. As the terparty to fulfil contractual obligations (“default risk”). performance of our participations might exceed expectations, and Allianz SE’s credit risk profile comes from three sources: our in- stock values also might increase, opportunities may arise from partic- vestment portfolio, guarantees and retrocession. ipations and other equity investments. Investment portfolio: Credit risk results from our investments in In 2017, Allianz SE had in place profit-and-loss transfer agree- fixed-income bonds, loans, derivatives, cash positions, and receiva- ments with twelve German subsidiaries. These are listed in the ap- bles, whose values may decrease depending on the credit quality of pendix on page 73. Risk from these contracts is reflected via the the obligors. risk capital calculation on participations. Guarantees: Credit risk is caused by the potential default of Group companies on commitments from contracts with external INTEREST RATE RISK stakeholders, which are backed with guarantees from Allianz SE. If the duration of our assets is shorter than that of our liabilities, we Retrocession: Credit risk to external reinsurers arises when insur- may suffer an economic loss in a falling-rate environment as we ance risk exposure from Allianz SE’s reinsurance business is retroced- reinvest maturing assets at lower rates prior to the maturity of liability ed to external reinsurance companies to mitigate insurance risks. contracts. Credit risk arises from potential losses resulting from a non- In contrast, opportunities may arise when interest rates increase. recoverability of reinsurance receivables, or from defaults on benefits Interest rate risk is managed within our asset / liability management under in-force reinsurance treaties. Our reinsurance partners are process and controlled via interest rate sensitivity limits. carefully selected by a dedicated team. Besides focusing on compa- nies with a strong credit profile, we may further require letters of CREDIT SPREAD RISK credit, cash deposits, or other financial measures to further mitigate Fixed-income assets such as bonds may lose value if credit spreads our exposure to credit risk. widen. However, our risk appetite for credit spread risk takes into The internal credit risk capital model takes into account the ma- account the underlying economics of our reinsurance business model. jor drivers of credit risk for each instrument, including exposure at As a liability-driven investor, we typically hold fixed-income assets default, rating, seniority, collateral, and maturity. Additional parame- covering reinsurance liabilities until maturity. This implies that short- ters assigned to obligors are migration probabilities and obligor asset term changes in market prices affect us to a lesser extent. correlations reflecting dependencies within the portfolio. Ratings are assigned to single obligors via an internal rating approach, which is INFLATION RISK based on long-term ratings from rating agencies, dynamically adjust- As a holding and reinsurance company, we are exposed to changing ed using market-implied ratings and the most recently available inflation rates. Since inflation increases reinsurance claims and costs qualitative information. as well as internal pension obligations, higher inflation rates will lead The loss profile of the portfolio is obtained through Monte Carlo to greater liabilities. simulation, taking into account interdependencies and exposure Inflation assumptions are already taken into account in our rein- concentrations per obligor segment. surance underwriting. That said, unexpected inflation can increase To ensure effective credit risk management, credit VaR limits are future claims and expenses, leading to greater liabilities; conversely, if derived from our internal risk capital framework, and rating bucket future inflation rates turn out lower than assumed, liabilities will be benchmarks are used to define our risk appetite for exposures in the less than anticipated. The risk of changing inflation rates is incorpo- lower investment grade and non-investment grade area. rated in our internal model. Our group-wide country and obligor group limit management framework (CrisP1) allows us to manage counterparty concentration CURRENCY RISK risk, covering both credit and equity exposures at the Group and The major part of Allianz SE’s foreign-currency risk comes from our Allianz SE levels. This limit framework forms the basis for discussions non-Euro participations. In addition to this risk, Allianz SE’s currency on credit actions. Clearly defined processes ensure that exposure risk is driven by its non-Euro reinsurance exposure, as well as by the concentrations and limit utilizations are appropriately monitored and use of non-Euro bonds as external financing instruments. managed. If the Euro strengthens, the Euro-equivalent net asset value of our foreign subsidiaries and the value of our financing instruments will decline from the perspective of Allianz SE; at the same time, however, the capital requirements in Euro will decrease, partially mitigating the total impact on the capitalization of Allianz SE. 11_Credit Risk Platform

Annual Report 2017 – Allianz SE 21 B _ Management Report of Allianz SE

UNDERWRITING RISK calculations. Where appropriate, the expertise and analysis of other Allianz SE’s underwriting risk consists of premium risk and reserve risk Group entities is leveraged. The Allianz Group performs regular inde- in the Property-Casualty reinsurance business, as well as of biometric pendent reviews of these analyses. risk from internal pensions and the Life/Health reinsurance business. Similar to premium risk, reserve risk is calculated based on actu- arial models. The reserve distributions derived are then used within PROPERTY-CASUALTY the internal model to calculate potential losses based on a prede-

Our property-casualty reinsurance business is exposed to premium fined confidence level of 99.5 %. risk related to adverse developments to the current year’s new and renewed business, as well as reserve risk related to the business in LIFE/HEALTH force. Underwriting risks in Allianz SE’s Life/Health reinsurance operations As part of our property-casualty reinsurance operations, we re- and from our internal pension obligations (biometric risks) include ceive premiums from our customers and provide insurance protection mortality, disability, morbidity, and longevity risks. Mortality, disability, in return. Premium risk is the risk that actual claims for the current and morbidity risks are associated with the unexpected increase in year business develop adversely relative to expected claims ratios. the occurrence of death, disability, or medical claims. Longevity risk is Premium risk is subdivided into three categories: Natural catastrophe the risk that the reserves covering life annuities and pension contracts risk, man-made risk, and non-catastrophe risk. might not be sufficient due to longer life expectancies of the insured. Premium risk is actively managed by Allianz SE. The assessment Life/Health underwriting risk arises from profitability being lower of risks as part of the underwriting process is a key element of our risk than expected. As profitability calculations are based on several management framework. There are clear underwriting limits and parameters – such as historical loss information, assumptions on infla- restrictions in place. Excessive risks are mitigated by external retro- tion or on mortality, and morbidity – realized parameters may differ cession agreements. All these measures contribute to a limitation of from the ones used for the calculation of pension liabilities and for risk accumulation. We also monitor concentrations and accumulation the underwriting. For example, higher-than-expected inflation may of non-market risks on a stand-alone basis (i.e. before diversification lead to higher medical claims in the future. However, beneficial devia- effects) within an Allianz Group global limit framework in order to tions can also occur; for example, a lower morbidity rate than ex- avoid substantial losses from single events such as natural catastro- pected will most likely result in lower claims. phes and from man-made catastrophes such as terror or large indus- We measure risks within our internal risk capital model, distin- trial risk accumulations. guishing, where appropriate, between risks affecting the absolute Premium risk is estimated based on actuarial models that are level and trend development of actuarial parameter assumptions as used to derive claims distributions and consider the features of our well as pandemic risk scenarios. reinsurance contracts (e.g. shares, limits, reinstatements, and commis- sions). Non-catastrophe risk is modelled using attritional loss models OPERATIONAL RISK for frequency losses, as well as frequency & severity models for large Operational risks represent losses resulting from inadequate or failed losses. Natural disasters, such as earthquakes, storms, and floods, internal processes, or from external events. They can stem from a represent a significant challenge for risk management due to their wide variety of sources, for example: accumulation potential and volatility of occurrence. For natural ca- tastrophe risk, we use special modelling techniques which combine − “Execution, Delivery and Process Management” losses arising portfolio data (geographic location, characteristics of insured objects from transaction or process management failures. Examples in- and their values) with simulated natural disaster scenarios to esti- clude interest from non-payment or underpayment of taxes. mate the magnitude and frequency of potential losses. For significant These losses tend to occur with a low financial impact (although exposures where such stochastic models do not exist, we use deter- single large loss events can occur). ministic, scenario-based approaches to estimate potential losses. − “Clients, Products & Business Practices” losses due to a failure to Similar approaches are used to evaluate risk concentrations for man- meet a professional obligation, or from the design of a transac- made catastrophes including losses from terrorism and industrial tion. Examples include anti-trust behavior, data protection, sanc- concentrations. These loss distributions are then used within the inter- tions and embargoes. These losses can have a high financial im- nal model to calculate potential losses with a predefined confidence pact. level of 99.5 %. − Other operational risks, including external fraud, financial mis- Reserve risk represents the risk of adverse developments in the statement risk, and a breach of cyber security causing business best estimate reserves over a one-year time horizon, resulting from disruption or fines, or a potential failure at an outsourcing partner fluctuations in the timing and/or amount of claims settlement. causing a disruption to our working environment. Allianz SE estimates and holds reserves for claims resulting from past events that have not yet been settled. The company experiences a Reflecting Allianz SE’s tasks as holding company for Allianz Group reserve loss if the reserves are not sufficient due to unexpected and reinsurer, the operational risk capital of Allianz SE is dominated developments; in contrast, there is the chance for positive returns if by the risk of potential losses within the areas of “Execution, Delivery our reserves prove to be too conservative. and Process Management” and “Clients, Products & Business Practices”. Reserve risk can be mitigated by retrocession. We constantly Operational risk capital is calculated using a scenario-based ap- monitor the development of reserves for reinsurance claims on a line- proach calling upon expert judgement as well as internal and exter- of-business level. In addition, Allianz SE conducts annual reserve nal operational loss data. Estimates of frequency and severity of uncertainty analyses based on similar methods used for reserve risk

22 Annual Report 2017 – Allianz SE B _ Management Report of Allianz SE

potential loss events for each material operational risk category are risks and towards meeting the Renewal Agenda objectives are moni- calculated and used as the basis for our internal model calibration. tored and evaluated in the strategic and planning dialogue between Allianz SE has implemented the Group-wide operational risk Allianz Group and the operative functions of Allianz SE. management framework that focuses on the early recognition and proactive management of material operational risks. The framework LIQUIDITY RISK defines roles and responsibilities as well as management processes Liquidity risk is defined as the risk that current or future payment and methods: Risk managers in the Allianz SE risk management obligations cannot be met or can only be met on the basis of ad- function, in their capacity as the “second line of defense”, identify and versely altered conditions. Liquidity risk arises primarily if there are evaluate relevant operational risks and control weaknesses via a mismatches in the timing of cash in- and out-flows. dialog with the “first line of defense”, and report operational risk The investment strategy of Allianz SE particularly focuses on the events in a central database. quality of investments and ensures a significant portion of liquid This framework specifies controls for risk mitigation. For example, assets in the portfolio (e.g. high-rated government or corporate compliance risks are addressed via written policies. The risk of financial bonds). We employ actuarial methods for estimating our liabilities misstatement is mitigated by a system of internal controls covering arising from reinsurance and internal pension contracts. In the course financial reporting. Outsourcing risks are covered by an Outsourcing of standard liquidity planning, we reconcile liquidity sources (e.g. cash Policy, by Service Level Agreements, and by Business Continuity and from investments and premiums) and liquidity needs (e.g. payments Crisis Management programs. Cyber risks are mitigated through in- due to reinsurance claims, expenses) under a best-estimate plan as vestments in cyber security and a variety of ongoing control activities. well as idiosyncratic and systemic adverse liquidity scenarios. The main goal of planning and managing Allianz SE’s liquidity BUSINESS RISK position is to ensure that we are always in a position to meet payment Allianz SE’s business risk consists of cost risk from property-casualty obligations. To comply with this objective, the liquidity position of reinsurance business and of policyholder behavior risk from both Allianz SE is monitored and forecast on a daily basis. life/health and property-casualty reinsurance. Allianz SE’s short-term liquidity is managed within Allianz SE’s Cost risks are associated with the risk that expenses incurred in cash pool, which serves as a centralized tool also for investing the administering policies are higher than expected, or that the new excess liquidity of other Group companies. Strategic liquidity planning business volume decreases to a level that does not allow Allianz SE to for Allianz SE over time horizons of 12 months and three years is absorb its fixed costs efficiently. reported to the Board of Management regularly. Assumptions on policyholder behavior are set in line with ac- The accumulated short-term liquidity forecast is updated daily and cepted actuarial methods and are based on our own historical data, is subject to an absolute minimum strategic cushion amount and an if and as available. If there is no historical data, assumptions are absolute minimum liquidity target. Both are defined for the Allianz SE based on industry data or expert judgment. cash pool in order to be protected against short-term liquidity crises. Reflecting the business model of Allianz SE as primarily a group- As part of our strategic planning, contingent liquidity requirements and internal reinsurer, business risk is minor. sources of liquidity are taken into account to ensure that Allianz SE is able to meet any future payment obligations even under adverse OTHER RISKS conditions. Major contingent liquidity requirements include non- (NOT MODELLED IN THE INTERNAL MODEL) availability of external capital markets, combined market and catas- Certain risks are not adequately addressed or mitigated by addition- trophe risk scenarios for subsidiaries, as well as lower-than-expected al capital and are therefore excluded from the internal risk capital profit transfers and dividends from subsidiaries. model. For these risks we also use a systematic approach with respect In order to protect the Allianz Group against the liquidity impact to identification, analysis, assessment, monitoring, and management, of adverse risk events beyond those covered by the capital and li- with the risk assessment generally based on qualitative criteria or quidity buffers at our subsidiaries, Allianz SE holds a strategic liquidity scenario analyses. The most important of these other risks are strate- reserve. gic, liquidity and reputational risk. REPUTATIONAL RISK STRATEGIC RISK Allianz SE’s reputation as a well-respected and socially aware hold- Strategic risk is the risk of a decrease in the company’s value that ing and reinsurance company is influenced by our behavior in a arises from adverse management decisions on business strategies range of areas, such as financial performance, quality of reinsurance and their implementation. underwriting and customer service, corporate governance, employee Strategic risks are identified and evaluated as part of relations, intellectual capital, and corporate responsibility. Allianz Group’s and Allianz SE’s Top Risk Assessment processes and Reputational risk is the risk of an unexpected drop in the value of discussed in various Board of Management-level committees (e.g. the the Allianz SE share price, the value of the in-force business, or the Group Finance and Risk Committee). We also monitor market and value of the future business caused by a decline in our reputation competitive conditions, capital market requirements, regulatory assessed by stakeholders. conditions, etc., to decide if strategic adjustments are necessary. All affected Allianz SE functions cooperate in the identification of The most important strategic risks are directly addressed through reputational risk. Group Communications and Corporate Responsibil- Allianz’s Renewal Agenda, which focuses on five themes: True Cus- ity assesses reputational risk for Allianz SE based on a group-wide tomer Centricity, Digital by Default, Technical Excellence, Growth methodology. Since 2015, Allianz SE has embedded conduct risk Engines and Inclusive Meritocracy. Progress on mitigating strategic

Annual Report 2017 – Allianz SE 23 B _ Management Report of Allianz SE

triggers for fair contracts and services into the reputational risk man- ASSUMPTIONS AND LIMITATIONS agement process. The identification and assessment of reputational risks is part of RISK FREE RATE AND VOLATILITY ADJUSTMENT our yearly Top Risk Assessment process, in course of which senior ASSUMPTIONS management also decides on a risk management strategy and relat- When calculating the fair values of assets and liabilities, the assump- ed actions. This is supplemented by quarterly updates. In addition, tions regarding the underlying risk-free yield curve are crucial in reputational risk is managed on a case-by-case basis. determining and discounting future cash flows. We apply the meth- odology provided by the European Insurance and Occupational Pensions Authority (EIOPA) within the technical documentation Internal risk capital framework (EIOPA BoS-15/035) for the extension of the risk-free interest rate curves beyond the last liquid tenor.1 We define internal risk capital as the capital required to protect us In addition, we adjust the risk-free yield curves by a volatility ad- against unexpected, extreme economic losses, which forms the basis justment in most markets where a volatility adjustment is defined by for determining our Solvency II regulatory capitalization. On a quar- EIOPA and approved by BaFin. This is done to better reflect the un- terly basis, we calculate internal risk capital for Allianz SE in total, as derlying economics of our business. The advantage of being a long- well as for all contributing business units. We also project risk capital term investor, therefore, is the opportunity to invest in bonds yielding requirements on a bi-weekly basis during periods of financial market spreads over the risk-free return and earning this additional yield turbulence. component over the duration of the bonds. Therefore, we reflect this mitigation using a volatility adjustment spread risk offset, and view GENERAL APPROACH the more relevant risk to be default risk rather than credit spread risk. For the management of our risk profile and solvency position, we utilize an approach that reflects the Solvency II rules. DIVERSIFICATION AND CORRELATION ASSUMPTIONS Our internal risk capital model considers concentration, accumula- INTERNAL MODEL tion, and correlation effects for risks when aggregating results for Our internal risk capital model is based on a Value at Risk approach Allianz SE. This reflects the fact that not all potential worst-case using a Monte Carlo simulation. Following this approach, we deter- losses are likely to materialize at the same time. This effect, which is mine the maximum loss in portfolio value in scope of the model known as diversification, forms a central element of our risk man- within a specified timeframe (“holding period”, set at one year) and agement framework. probability of occurrence (“confidence level”, set at 99.5 %). We simu- Diversification typically occurs when looking at combined risks late risk events from all risk categories modelled (“sources of risk”) that are not, or only partly, interdependent. Important diversification and calculate the portfolio value based on the net fair value of assets factors include regions (e.g. windstorm in Australia vs. windstorm in minus liabilities under each scenario, including risk mitigating Germany), risk categories (e.g. market risk vs. underwriting risk), and measures like retrocession or derivatives. subcategories within the same risk category (e.g. equity risk vs. inter- Risk capital is defined as the difference between the current est rate risk). Ultimately, diversification is driven by the specific fea- portfolio value and the portfolio value under adverse conditions at tures of the investments or reinsurance transactions in question and the 99.5 % confidence level. As we consider the impact of a negative their respective risk exposures. For example, an operational risk event or positive event on all covered businesses at the same time, diversifi- in the Allianz SE branch in Singapore may be considered to be highly cation effects across products and regions are taken into account. independent of a change in the credit spread for a French govern- The results of our Monte Carlo simulation allow us to analyze our ment bond held in Allianz SE’s reinsurance investment portfolio in exposure to each source of risk, both separately and in aggregate. Munich. We also analyze several pre-defined stress scenarios, representing Where possible, Allianz Group derives correlation parameters for historical events and adverse scenarios relevant for our portfolio. each pair of market risks through statistical analysis of historical market data, considering quarterly observations over more than a COVERAGE OF THE RISK CAPITAL CALCULATIONS decade. If historical market data or other portfolio-specific obser- Allianz SE’s internal risk capital model covers the activities of Allianz SE vations are insufficient or not available, correlations are set by the as the holding company for Allianz Group, as well as its activities as a Allianz Group Correlation Setting Committee, which combines the reinsurer. expertise of risk and business experts, according to a well-defined Whereas most subsidiaries are covered through treatment as and controlled process. In general, when using expert judgement we participations, the model covers, on a granular level, the very closely set the correlation parameters to represent the joint movement of linked activities of 19 subsidiaries which reflect either financing enti- risks under adverse conditions. Based on these correlations, the ties or other service providers. Allianz Group uses an industry-standard approach, the Gaussian The risk capital model covers all relevant assets (including fixed- copula, to determine the dependency structure of quantifiable income instruments, equities, real estate, and derivatives) and liabili- sources of risk within the applied Monte Carlo simulation. ties (including the run-off of all technical provisions, as well as depos- its, issued debt and other liabilities such as guarantees).

Therefore, Allianz SE’s risk capital framework covers all material and quantifiable risks. Risks specifically not covered by our internal 1_Due to late availability of the EIOPA publication, the risk-free interest rate term structure used might slightly differ from model include reputational, liquidity and strategic risk. the one published by EIOPA.

24 Annual Report 2017 – Allianz SE B _ Management Report of Allianz SE

ACTUARIAL ASSUMPTIONS scheme. In addition, risk capital increased as the result of a central Our internal risk capital model also includes assumptions on claims model change for credit spread risk. The impact of these model trends, liability inflation, mortality, longevity, morbidity, policyholder changes on risk capital was € 863 mn. behavior, expenses, etc. We use our own internal historical data for This increase was partially offset especially by the change of our actuarial assumptions wherever possible, leverage expertise of other interest rate model to also consider negative interest rates, and the Allianz Group companies in the scope of the internal model, and also elimination of weaknesses in the modelling of the insurance risk from consider recommendations from the insurance industry, supervisory a Whole-Account Stop-Loss reinsurance contract with Allianz Re authorities, and actuarial associations. The derivation of our actuarial Dublin d.a.c., which allowed removing Allianz SE’s capital add-on. assumptions is based on generally accepted actuarial methods. In aggregate, the total impact of model changes implemented Within our internal risk capital and financial reporting framework, in 2017 was an increase in risk capital of € 162 mn. comprehensive processes and controls exist for ensuring the reliability We also updated the methodology for risk capital allocation, of these assumptions. moving from a matrix approach to directly retrieving the risk contribu- tions from the scenarios of the Monte Carlo simulation. This ensures MODEL LIMITATIONS an economically more correct allocation of Allianz SE’s risk capital to

The internal model is based on a 99.5 % confidence level. Therefore, the risk sub-categories. there is a low statistical probability of 0.5 % that experienced losses In the subsequent sections, the risk figures for 2016 after model could exceed this threshold at Allianz SE level in the course of one changes will form the basis for the analysis of the changes in our risk year. profile in 2017. We use model and scenario parameters derived from historical data, where available, to characterize future possible risk events. If Allianz SE: Impact of model changes; Allocated risk according to the future market conditions differ substantially from the past, for exam- risk profile € mn ple in an unprecedented crisis, our VaR approach may be too con- 1 2 servative or too liberal in ways that are difficult to predict. In order to as of 31 December 2016 2016 mitigate reliance on historical data, we complement our VaR analysis Market risk 20,193 19,664 with stress testing. Credit risk 593 633 Underwriting risk 3,129 2,731 Furthermore, we validate the model and parameters through Business risk 45 46 sensitivity analyses, independent internal peer reviews, and – where Operational risk 771 773 appropriate – independent external reviews, focusing on methods for Diversification (3,656) (3,325) selecting parameters and control processes. Overall, we believe that Capital add-on - 391 our validation efforts are effective and that the model adequately Total Allianz SE 21,075 20,913 assesses the risks to which we are exposed. 1_2016 risk profile figures recalculated based on model changes in 2017. The construction and application of replicating portfolios is sub- 2_2016 risk profile figures as reported previously. ject to the set of replicating instruments available, and might, there- fore, be too simple or too restrictive to capture all factors affecting the change in value of obligations. We believe that the obligations The changes to our internal model affected the risk categories as are adequately represented by the replicating instruments. follows: Since the internal risk capital model takes into account the change in the economic fair value of our assets and liabilities, it is MARKET RISK crucial to estimate the market value of each item accurately. For Market risk was most strongly affected by negative interest rates, the some assets and liabilities it may be difficult, if not impossible – nota- IAS 19 pensions and the pension cash flows model changes. The bly in distressed financial markets – to either obtain a current market combined impact of all model changes on total market risk was an price or to apply a meaningful mark-to-market approach. For such increase of € 529 mn to € 20,193 mn (Reported previously: assets we apply a mark-to-model approach. For some of our liabili- € 19,664 mn). ties, the accuracy of their values additionally depends on the quality of the actuarial cash flow estimates. Despite these limitations, we CREDIT RISK believe the estimated fair values are appropriately assessed. In 2017, no new model changes were implemented to the internal model for credit risk. We only introduced annual updates of rating MODEL CHANGES IN 2017 transition matrices and asset correlations based on extended time In 2017, our internal model has been adjusted based on regulatory series. Nevertheless, the change of the credit spread risk model also developments and feedback received in the course of the ongoing had an impact on credit risk. As a result, credit risk decreased by consultations with regulators. For the sake of clarity, all model € 40 mn to € 593 mn. changes and the resulting impacts on our risk profile are presented jointly within this section, based on data as of 31 December 2016. UNDERWRITING RISK AND CAPITAL ADD-ON Most of the model changes causing a significant increase in risk The increase in underwriting risk is mainly due to a change in the capital were related to pensions, especially the Group’s IAS 19 pen- reflection of the risk from the Whole-Account Stop-Loss agreement sions model change, a change in the tool to estimate the best- with Allianz Re Dublin d.a.c. A better reflection of this risk in the un- estimate cash flows for German pension liabilities, as well as the derwriting risk modelling allowed removing the € 391 mn capital modelling of risk from future service costs from the VVW pension add-on. From the perspective of the total risk for Allianz SE, this relief

Annual Report 2017 – Allianz SE 25 B _ Management Report of Allianz SE

was higher that the additional burden from the rise in underwriting Due to the review of the Solvency II framework by EIOPA, future risk capital. Solvency II capital requirements might change depending on the Together with minor model changes, the combined impact of all outcome. model changes on the total underwriting risk was an increase of € 398 mn to € 3,129 mn (Reported previously: € 2,731 mn). MANAGEMENT ASSESSMENT Allianz SE’s management feels comfortable with Allianz SE’s overall BUSINESS RISK AND OPERATIONAL RISK risk profile and has confidence in the effectiveness of its risk No material model changes have been applied for business risk and management framework to meet the challenges of a rapidly operational risk in 2017. Nonetheless, business risk marginally de- changing environment as well as of day-to-day business needs. This creased and operational risk slightly increased, reflecting an indirect confidence is based on several factors: impact from model changes in other risk categories. − Due to its effective capital management, Allianz SE is well capi- talized. We have met our internal and regulatory solvency targets Allianz SE risk profile and management as of 31 December 2017. assessment − Allianz SE’s management also believes that Allianz SE is well positioned to withstand potentially adverse future events, in part due to our strong internal limit framework defined by Allianz SE’s RISK PROFILE AND MARKET ENVIRONMENT risk appetite and risk management practices, including our ap- The quantitative risk profile of Allianz SE is primarily dominated by proved internal model. market risk that results from its non-traded insurance participations − Allianz SE has a conservative investment profile and disciplined when measured in a manner consistent with the treatment of business practices in the reinsurance business, leading to sustain- participations under Solvency II (e.g. without looking through to the able operating earnings with a well-balanced risk-return profile. underlying risks behind the participations). In order to provide greater transparency, the Group risk figures as reflected in the Allianz Group SOLVENCY II REGULATORY CAPITALIZATION Annual Report can be interpreted as a “look-through” into the Allianz SE’s own funds and capital requirements are based on the consolidated risk profile represented by all of the Group’s market value balance sheet approach as the major economic princi- participations as well as those risks unique to Allianz SE. The second ple of Solvency II rules.1 Our regulatory capitalization is shown in the largest risk for Allianz SE from an internal model perspective is following table: underwriting risk arising from its reinsurance business and from internal pensions. Allianz SE: Solvency II regulatory capitalization The risk profile and relative contributions have changed in 2017, predominantly due to changes in the market environment and man- as of 31 December 2017 20161 agement actions. Own funds € bn 84.2 81.3 Capital requirement € bn 23.7 20.9 FINANCIAL MARKETS AND OPERATING Capitalization ratio % 355 389

ENVIRONMENT 1_2016 risk profile figures as reported previously.

Financial markets are characterized by historically low interest rates and risk premiums, prompting investors to look for investments with higher returns – which potentially implies higher risk. In addition to As of 31 December 2017, the Solvency II capitalization of the legal sustained low interest rates, the challenges of implementing long- entity Allianz SE is at 355 %. The decrease by 34 percentage points in term structural reforms in key Eurozone countries and the uncertainty 2017 was driven by a € 2.8 bn increase risk capital, which was only about the future path of monetary policy may lead to continued partially compensated by the rise in eligible own funds. market volatility. This could be accompanied by a flight to quality, combined with falling equity and bond prices due to rising spread levels, even in the face of potentially lower interest rates. Also, possi- Quantifiable risks and opportunities by risk ble asset bubbles (as observed in the Chinese equity market) might category spill over to other markets, or rising geopolitical tensions – e.g. caused by the North Korean missile program – might trigger market sell-offs, This Risk and Opportunity Report outlines Allianz SE’s risk figures, which contribute to increasing volatility. Therefore, we continue to reflecting its risk profile based on pre-diversified risk figures and closely monitor political and financial developments – such as the Allianz SE diversification effects. Brexit in the United Kingdom, the European migrant crisis, and the We measure and steer risk based on an approved internal mod- rise of Euroscepticism, or the situation on the Korean peninsula – in el, under which we derive our risk capital from potential adverse order to manage our overall risk profile to specific event risks. developments of Own Funds. The resulting risk profile provides an overview of how risks are distributed over different risk categories, REGULATORY DEVELOPMENTS

Following the approval of our internal model in November 2015, the model has been fully applied since the beginning of 2016. 1_Own funds and capital requirement are calculated taking into account volatility adjustment and yield curve extension, as described in Risk free rate and volatility adjustment assumptions on page 24.

26 Annual Report 2017 – Allianz SE B _ Management Report of Allianz SE

and determines the regulatory capital requirements in accordance INFLATION RISK with Solvency II. The € 78 mn increase in the relief for total risk from inflation in 2017 The pre-diversified risk figures reflect the diversification effects mainly reflects a change in the sharing of costs for pensions between within each risk category modeled (i.e. within market, credit, under- Allianz SE and several German subsidiaries. writing, business, and operational risk) but do not include the diversi- fication effects across risk categories. The Allianz SE diversified risk EQUITY RISK also captures the diversification effects across all risk categories. In 2017, Allianz SE’s equity risk strongly increased by € 3,191 mn, mainly The Allianz SE diversified risk is broken down as follows: reflecting a change in the value of participations in Allianz Group companies. Allianz SE: Allocated risk according to the risk profile As of 31 December 2017, our investment assets that are sensitive € mn to changing equity markets would have lost € 320 mn in value, as- as of 31 December 2017 2016 suming equity markets declined by 30 %. Market risk 22,898 20,193 Credit risk 568 593 CREDIT SPREAD RISK Underwriting risk 3,216 3,129 Allianz SE’s credit spread risk is € 642 mn lower than in 2016. This is Business risk 37 45 especially explained by a reduction in loans provided to subsidiaries. Operational risk 847 771 Diversification (3,870) (3,656) REAL ESTATE RISK Total Allianz SE 23,696 21,075 As of 31 December 2017, real estate risk for Allianz SE is minor

(€ 79 mn). The marginal increase in 2017 of € 7 mn reflects an in- crease in real estate prices. As of 31 December 2017, Allianz SE’s diversified risk capital of € 23.7 bn (2016: € 21.1 bn) represented a diversification benefit of CURRENCY RISK approximately 14 % (2016: 15 %) across risk categories. Allianz SE’s € 74 mn currency risk at year-end 2017 reflects net open The following sections outline the evolution of the risk profile per positions in several currencies, dominated by the U.S. Dollar. The modeled risk category. All risks are presented on a pre-diversified € 119 mn reduction is mainly caused by a stronger Euro, together with basis and concentrations of single sources of risk are discussed ac- various changes in positions such as a reduction in USD loans provid- cordingly. ed to subsidiaries.

MARKET RISK RESULTS CREDIT RISK The following table presents the market risk of Allianz SE related to Throughout 2017, the credit environment was stable. Annual updates the source of risk. based on extended time series were performed for credit risk param- eters like the transition matrix and asset correlations, which had only Allianz SE: Risk profile – Market risk by source of risk a slightly positive effect on credit risk. pre-diversified, € mn Credit risk of the legal entity Allianz SE decreased by € 25 mn in as of 31 December 2017 2016 2017, dominantly resulting from a decrease in the credit risk exposure Interest rate 123 (223) of assets. Inflation (186) (108) Credit spread 359 1,001 UNDERWRITING RISK Equity 22,450 19,259 The following table presents the pre-diversified risk calculated for Real estate 79 72 underwriting risks stemming from our reinsurance business and inter- Currency 74 193 nal pensions. Total Allianz SE 22,898 20,193

Allianz SE: Risk Profile – Underwriting risk by source of risk pre-diversified, € mn

For the legal entity Allianz SE, the pre-diversified market risk showed as of 31 December 2017 2016 a strong increase of € 2,704 mn driven equity risk. Premium natural catastrophe 289 402 Premium non-catastrophe and terror 1,758 1,697 INTEREST RATE RISK Reserve 1,074 980 In 2017, our interest rate risk increased by € 346 mn, mainly reflecting Biometric 95 50 Total Allianz SE 3,216 3,129 a reduction in loans provided to subsidiaries.

As of 31 December 2017, Allianz SE’s interest-rate-sensitive in- vestment assets amounting to a market value of € 48.5 bn would have gained € 2.2 bn or lost € 2.0 bn in value, in the event of interest As of 31 December 2017, the total Allianz SE pre-diversified under- rates changing by -100 and + 100 basis points, respectively. writing risk was € 3.2 bn, with premium risk amounting to € 2.0 bn, reserve risk to € 1.1 bn, and biometric risk to € 0.1 bn. The total figure does not materially deviate from end 2016.

Annual Report 2017 – Allianz SE 27 B _ Management Report of Allianz SE

PROPERTY-CASUALTY LIFE/HEALTH In 2017, the biometric risk of Allianz SE is € 45 mn higher than in Premium risk 2016, which is dominantly reflecting a rise in exposures from internal In 2017, Allianz SE’s natural catastrophe risk decreased by € 113 mn, pensions, caused by a change in the cost sharing between Allianz SE mainly reflecting an increase in retrocession. and several German subsidiaries. The top five scenarios contributing to the natural catastrophe risk of Allianz SE as of December 2017 were: a windstorm in Europe, an BUSINESS RISK earthquake in Turkey, an earthquake in Italy, an earthquake in Aus- The € 8 mn decrease in business risk is immaterial. tralia, and a tropical cyclone in Australia.

With an increase by 3.6 %, non-catastrophe and terror premium OPERATIONAL RISK risk of Allianz SE only marginally changed in 2017. The increase of € 76 mn shown in the operational risk is driven by the annual update of local parameters, mainly reflecting a reassessment Reserve risk of cyber and other IT-related risks. The € 94 mn increase in Allianz SE’s reserve risk in 2017 mainly re- flects the building up of reserves in Group-internal quota shares.

28 Annual Report 2017 – Allianz SE B _ Management Report of Allianz SE

CORPORATE GOVERNANCE REPORT

Good corporate governance is essential for sustainable business BOARD OF MANAGEMENT AND GROUP COMMITTEES performance. The Board of Management and the Supervisory Board In the financial year 2017, the following Board of Management of Allianz SE thus attach great importance to complying with the committees were in place: recommendations of the German Corporate Governance Code (re- ferred to hereinafter as the “Code”). The Declaration of Conformity Board Committees with the recommendations of the Code, issued by the Board of Man- Board committees Responsibilities agement and the Supervisory Board on 14 December 2017, and the GROUP FINANCE AND RISK COMMITTEE Preparation of the capital and liquidity company’s position regarding the Code’s suggestions can be found in Dr. Dieter Wemmer (Chairman), planning for the Group and Allianz SE, Sergio Balbinot, implementing and overseeing the the Statement on Corporate Management pursuant to § 289f of the Dr. Günther Thallinger, principles of group-wide capital and HGB starting on page 34. Dr. Axel Theis. liquidity planning, as well as investment strategy and preparing risk strategy. This includes, in particular, significant individual investments and guidelines for currency management, Group financing Corporate Constitution and internal Group capital management, as well as establishing and overseeing a of the European Company (SE) group-wide risk management and monitoring system including dynamic As a European Company, Allianz SE is subject to special European SE stress tests. GROUP IT COMMITTEE Developing, proposing, implementing regulations and the German SE Implementation Act (“SE- Dr. Christof Mascher (Chairman), and monitoring a group-wide IT strategy, Ausführungsgesetz”) in addition to the German SE Employee In- Jacqueline Hunt, approving relevant IT investments. Dr. Axel Theis, volvement Act (“SE-Beteiligungsgesetz”). However, the main features Dr. Dieter Wemmer, of a German stock corporation – in particular the two-tier board Dr. Werner Zedelius. GROUP MERGERS Managing and overseeing Group M&A system (Board of Management and Supervisory Board) and the AND ACQUISITIONS COMMITTEE transactions, including approval of principle of equal employee representation on the Supervisory Board Dr. Helga Jung (Chairwoman), individual transactions within certain Oliver Bäte, thresholds. – have been maintained by Allianz SE. Dr. Dieter Wemmer. As of 31 December 2017

Function of the Board of Management In addition to Board committees, there are also Group committees. The Board of Management of Allianz SE comprises nine members. It They are responsible for preparing decisions for the Board of Man- is responsible for setting business objectives and the strategic direc- agement of Allianz SE, submitting proposals for resolutions, and tion, for coordinating and supervising the operating entities, and for ensuring a smooth flow of information within the Group. implementing and overseeing an efficient risk management system. The Board of Management also prepares the annual financial In the financial year 2017, the following Group committees were in statements of Allianz SE, the Allianz Group’s consolidated financial place: statements, the market value balance sheet, and the interim report. The members of the Board of Management are jointly responsi- Group committees ble for management and for complying with legal requirements. Group committees Responsibilities Notwithstanding this overall responsibility, the individual members GROUP COMPENSATION COMMITTEE Designing, monitoring, and improving head the departments they have been assigned independently. Board members of Allianz SE and executives group-wide compensation systems in line below Allianz SE Board level with regulatory requirements and sub- There are divisional responsibilities for business segments as well as mitting an annual report on the results of functional responsibilities. The latter include the Finance, Risk Man- its monitoring, along with proposals for improvement. agement and Controlling Functions, Investments, Operations – in- GROUP INVESTMENT COMMITTEE Implementing the Group investment strategy, cluding IT –, Human Resources, Legal, Compliance, Internal Audit, Members of the Board of Management and including monitoring group-wide invest- executives below Allianz SE Board level ment activities as well as approving invest- and Mergers & Acquisitions. Business division responsibilities focus on ment-related frameworks and guidelines geographical regions or Global Lines, such as Asset Management. and individual investments within certain thresholds. Rules of procedure specify in more detail the structure and depart- mental responsibilities of the Board of Management. Board of Management meetings are led by the Chairman. Each member of the Board may request a meeting, providing notification The Allianz Group runs its operating entities and business segments of the proposed subject. The Board takes decisions by a simple ma- via an integrated management and control process. The Holding and jority of participating members. In the event of a tie, the Chairman the operating entities first define the business strategies and goals. casts the deciding vote. The Chairman can also veto decisions, but he On this basis, joint plans are then prepared for the Supervisory cannot impose any decisions against the majority vote. Board’s consideration when setting targets for the performance- based remuneration of the members of the Board of Management. For details, see the Remuneration Report starting on page 37.

Annual Report 2017 – Allianz SE 29 B _ Management Report of Allianz SE

The Board of Management reports regularly and comprehen- The Supervisory Board regularly reviews the efficiency of its ac- sively to the Supervisory Board on business development, the com- tivities. The Supervisory Board discusses recommendations for im- pany’s financial position and earnings, planning and achievement of provements and adopts appropriate measures on the basis of recom- objectives, business strategy, and risk exposure. Details on the Board mendations from the Standing Committee. The self-assessment also of Management’s reporting to the Supervisory Board are laid down includes an evaluation of the fitness and propriety of the individual in the information rules issued by the Supervisory Board. members. Important decisions of the Board of Management require ap- proval by the Supervisory Board. These requirements are stipulated SUPERVISORY BOARD COMMITTEES by law, by the Statutes, or in individual cases by decisions of the An- Part of the Supervisory Board’s work is carried out by its committees. nual General Meeting (AGM). Supervisory Board approval is required, The Supervisory Board receives regular reports on the activities of its for example, for certain capital transactions, intercompany agree- committees. The composition of committees and the tasks assigned ments, and the launch of new business segments or the closure of to them are regulated by the Supervisory Board’s Rules of Procedure. existing ones. Approval is also required for acquisitions of companies and holdings in companies, as well as for divestments of Group com- Supervisory board committees panies that exceed certain threshold levels. The Agreement concern- Supervisory board committees Responsibilities ing the Participation of Employees in Allianz SE, in the version dated STANDING COMMITTEE – Approval of certain transactions which require the 3 July 2014 (hereinafter “SE Agreement”), requires the approval of the 5 members approval of the Supervisory Board, e.g. capital Supervisory Board for the appointment of the member of the Board – Chairman: Chairman measures, acquisitions, and disposals of of the Supervisory Board participations of Management responsible for employment and social welfare. (Michael Diekmann) – Preparation of the Declaration of Conformity – Two further shareholder representatives pursuant to § 161 “Aktiengesetz” (German Stock (Herbert Hainer, Jim Hagemann Snabe) Corporation Act) and checks on corporate – Two employee representatives (Gabriele governance Burkhardt-Berg, Jürgen Lawrenz) – Preparation of the efficiency review of the Principles and function of the Supervisory Board Supervisory Board AUDIT COMMITTEE – Initial review of the annual Allianz SE and consoli- The German Co-Determination Act (“Mitbestimmungsgesetz”) does 5 members dated financial statements, management reports – Chairman: appointed (incl. Risk Report) and the dividend proposal, not apply to Allianz SE because it has the legal form of a European by the Supervisory Board review of half-yearly reports or, where applicable, (Dr. Friedrich Eichiner) quarterly financial reports or statements Company (SE). Instead, the size and composition of the Supervisory – Three shareholder – Monitoring of the financial reporting process, Board is determined by general European SE regulations. These regu- representatives (in addition to the effectiveness of the internal control and audit Dr. Friedrich Eichiner: Sophie Boissard, system and legal and compliance issues lations are implemented in the Statutes and by the SE Agreement. Michael Diekmann) – Monitoring of the audit procedures, including The Supervisory Board comprises twelve members, including six – Two employee representatives the independence of the auditor and the services (Jean-Jacques Cette, Martina Grundler) additionally rendered, awarding of the audit shareholder representatives appointed by the AGM. The six contract and determining the focal points of the audit employee representatives are appointed by the SE works council. The RISK COMMITTEE – Monitoring of the general risk situation and special specific procedure for their appointment is laid down in the SE 5 members risk developments in the Allianz Group Agreement. This agreement stipulates that the six employee repre- – Chairman: appointed by the Supervisory – Monitoring of the effectiveness of the risk Board (Michael Diekmann) management system sentatives must be allocated in proportion to the number of Allianz – Three shareholder representatives – Initial review of the Risk Report and other risk- employees in the different countries. The Supervisory Board currently (in addition to Michael Diekmann: related statements in the annual financial Christine Bosse, Dr. Friedrich Eichiner) statements and management reports of Allianz SE in office comprises four employee representatives from Germany and – Two employee representatives (Godfrey and the Allianz Group, informing the Audit Hayward, Jürgen Lawrenz) Committee of the results of such reviews one each from France and the United Kingdom. According to § 17 (2) PERSONNEL COMMITTEE – Preparation of the appointment of Board of of the German SE Implementation Act (“SE-Ausführungsgesetz”), the 3 members Management members Supervisory Board of Allianz SE shall be composed of at least 30 % – Chairman: Chairman – Preparation of plenary session resolutions on the of the Supervisory Board (Michael compensation system and the overall women and at least 30 % men. Diekmann) compensation of Board of Management members The Supervisory Board oversees and advises the Board of – One further shareholder representative – Conclusion, amendment, and termination of service (Herbert Hainer) contracts of Board of Management members Management on managing the business. It is also responsible for – One employee representative (Rolf unless reserved for the plenary session Zimmermann) – Long-term succession planning for the Board of appointing the members of the Board of Management, determin- Management ing their overall remuneration, and reviewing Allianz SE’s and the – Approval of the assumption of other mandates by Board of Management members Allianz Group’s annual financial statements. The Supervisory Board’s NOMINATION COMMITTEE – Setting of concrete objectives for the composition activities in the 2017 financial year are described in the Supervisory 3 members of the Supervisory Board Board Report starting on page 2. – Chairman: Chairman – Establishment of selection criteria for shareholder of the Supervisory Board (Michael representatives on the Supervisory Board in The Supervisory Board takes all decisions based on a simple ma- Diekmann) compliance with the Code’s recommendations on the composition of the Supervisory Board jority. The special requirements for appointing members to the Board – Two further shareholder representatives (Christine Bosse, Jim Hagemann Snabe) – Selection of suitable candidates for election to the of Management, as stipulated in the German Co-Determination Act, Supervisory Board as shareholder representatives and the requirement to have a Conciliation Committee do not apply TECHNOLOGY COMMITTEE – Regular exchange regarding technological 5 members developments to an SE. In the event of a tie, the casting vote lies with the Chairman – Chairman: appointed by the Supervisory – In-depth monitoring of the Board of Management’s of the Supervisory Board, who at Allianz SE must be a shareholder Board (Jim Hagemann Snabe) technology and innovation strategy – Three shareholder representatives – Support of the Supervisory Board in monitoring the representative. If the Chairman is not present in the event of a tie, the (in addition to Jim Hagemann Snabe: implementation of the Board of Management’s technology and innovation strategy. casting vote lies with the vice chairperson from the shareholder side. Michael Diekmann, Dr. Friedrich Eichiner) – Two employee representatives (Gabriele A second vice chairperson is elected on the proposal of the employee Burkhardt-Berg, Rolf Zimmermann) representatives. As of 31 December 2017

30 Annual Report 2017 – Allianz SE B _ Management Report of Allianz SE

PUBLICATION OF DETAILS OF MEMBERS’ Presence in % PARTICIPATION IN MEETINGS The Supervisory Board considers it good corporate governance to RISK COMMITTEE publish the details of individual members’ participation in plenary Michael Diekmann (Chairman and member from 7 May 2017) 1/1 100 sessions and committee meetings: Dr. Helmut Perlet (Chairman and member until 3 May 2017) 1/1 100 Dante Barban (Member until 3 May 2017) 1/1 100 Christine Bosse 2/2 100 Publication of details of members’ participation in meetings Dr. Friedrich Eichiner 2/2 100 Presence in % Godfrey Hayward (Member from 3 May 2017) 1/1 100 Jürgen Lawrenz 2/2 100 PLENARY SESSIONS OF THE SUPERVISORY BOARD Michael Diekmann (Chairman and member from 7 May 2017) 3/3 100 TECHNOLOGY COMMITTEE (FROM 3 MAY 2017) Dr. Helmut Perlet (Chairman and member until 6 May 2017) 4/4 100 Jim Hagemann Snabe (Chairman) 2/2 100 Dr. Wulf H. Bernotat (Vice Chairman and member until 3 May 2017) 3/3 100 Gabriele Burkhardt-Berg 2/2 100 Jim Hagemann Snabe (Vice Chairman from 3 May 2017) 7/7 100 Michael Diekmann (Member from 7 May 2017) 2/2 100 Rolf Zimmermann (Vice Chairman) 7/7 100 Dr. Friedrich Eichiner 2/2 100 Dante Barban (Member until 3 May 2017) 3/3 100 Rolf Zimmermann 2/2 100

Sophie Boissard (Member from 3 May 2017) 4/4 100 Christine Bosse 6/7 86 The Nomination Committee did not convene any meetings in the Gabriele Burkhardt-Berg 6/7 86 2017 financial year. Jean-Jacques Cette 7/7 100 Dr. Friedrich Eichiner 7/7 100 Martina Grundler 5/7 71 Herbert Hainer (Member from 3 May 2017) 4/4 100 Godfrey Hayward (Member from 3 May 2017) 4/4 100 Prof. Dr. Renate Köcher (Member until 3 May 2017) 2/3 67 Jürgen Lawrenz 7/7 100

STANDING COMMITTEE Michael Diekmann (Chairman and member from 7 May 2017) 2/2 100 Dr. Helmut Perlet (Chairman and member until 6 May 2017) 1/1 100 Dr. Wulf H. Bernotat (Member until 3 May 2017) 1/1 100 Gabriele Burkhardt-Berg 3/3 100 Herbert Hainer (Member from 3 May 2017) 2/2 100

Prof. Dr. Renate Köcher (Member until 3 May 2017) 0/1 0 Jürgen Lawrenz (Member from 3 May 2017) 2/2 100 Jim Hagemann Snabe (Member from 3 May 2017) 2/2 100 Rolf Zimmermann (Member until 3 May 2017) 1/1 100

PERSONNEL COMMITTEE Michael Diekmann (Chairman and member from 7 May 2017) 3/3 100 Dr. Helmut Perlet (Chairman and member until 6 May 2017) 1/1 100 Christine Bosse (Member until 3 May 2017) 1/1 100 Herbert Hainer (Member from 3 May 2017) 3/3 100 Rolf Zimmermann 4/4 100

AUDIT COMMITTEE Dr. Friedrich Eichiner (Chairman and member from 3 May 2017) 3/3 100 Dr. Wulf H. Bernotat (Chairman and member until 3 May 2017) 2/2 100 Sophie Boissard (Member from 3 May 2017) 2/3 67 Jean-Jacques Cette 5/5 100 Michael Diekmann (Member from 7 May 2017) 3/3 100 Martina Grundler 4/5 80 Dr. Helmut Perlet (Member until 3 May 2017) 2/2 100 Jim Hagemann Snabe (Member until 3 May 2017) 2/2 100

Annual Report 2017 – Allianz SE 31 B _ Management Report of Allianz SE

OBJECTIVES OF THE SUPERVISORY BOARD overall Supervisory Board, also to be established due to a new rec- REGARDING ITS COMPOSITION ommendation of the Code, the diversity concept in accordance with The objectives for the composition of the Supervisory Board in the the legislation regarding the implementation of the E.U. guideline as version of August 2017, as specified to implement a recommendation regards the disclosure of non-financial and diversity information (CSR by the Code, are as follows. In addition to the skills profile for the Directive) is also included:

Objectives of Allianz SE’s Supervisory Board regarding its composition

“The aim of Allianz SE’s Supervisory Board is to have members who are equipped with the necessary Employee representation within Allianz SE according to the Agreement concerning the Participation skills and competence to properly supervise and advise Allianz SE’s management. Supervisory Board of Employees in Allianz SE contributes to diversity of work experience and cultural background. candidates should possess the professional expertise and experience, integrity, motivation and Pursuant to the provisions of the German SE Participation Act (SEBG) the number of women and commitment, independence and personality required to successfully carry out the responsibilities of a men appointed as German employee representatives should be proportional to the number of Supervisory Board member in a financial services institution with international operations. women and men working in the German companies. However, the Supervisory Board does not have These objectives take into account the regulatory requirements for the composition of the Supervisory the right to select the employee representatives. Board as well as the relevant recommendations of the German Corporate Governance Code The following requirements and objectives apply to the composition of Allianz SE’s Supervisory (“GCGC”). In addition to the requirements for each individual member, a profile of skills and expertise Board: (“Kompetenzprofil”) as well as a diversity concept is provided for the entire Supervisory Board.

I. Requirements relating to the individual members of the Supervisory Board – depending on possible membership in one or more of the current six Supervisory Board special committees, this involves extra time planning to participate in these Committee meetings and do 1. Propriety the necessary preparation for these meetings; this applies in particular for the Audit and risk Committees; The members of the Supervisory Board must be proper as defined by the regulatory provisions. A – they can attend extraordinary meetings of the Supervisory Board or of a special committee to person is assumed to be proper as long as no facts are to be known which may cause impropriety. deal with special matters as and when required. Therefore, no personal circumstances shall exist which – according to general experience – lead to the assumption that the diligent and orderly exercise of the mandate may be affected (in particular 5. Retirement age administrative offenses or violation of criminal law, esp. in connection with commercial activity). The members of the Supervisory Board shall, as a rule, not be older than 70 years of age. 2. Fitness 6. Term of membership The members of the Supervisory Board must have the expertise and experience necessary for a The continuous period of membership for any member of the Supervisory Board should, as a rule, diligent and autonomous exercise of the Allianz SE Supervisory Board mandate, in particular for not exceed 15 years. exercising control of and giving advice to the Board of Management as well as for the active support of the development of the company. This comprises in particular: 7. Former Allianz SE Management Board members – adequate expertise in all business areas; Former Allianz SE Management Board members are subject to the mandatory corporate law cooling- – adequate expertise in the insurance and finance sector or comparable relevant experience and off period of two years. expertise in other sectors; According to regulatory provisions, no more than two former Allianz SE Management Board – adequate expertise in the regulatory provisions material for Allianz SE (supervisory law, including members shall be members of the Supervisory Board. Solvency II regulation, corporate and capital markets law, corporate governance); – ability to assess the business risks; II. Requirements for the entire Supervisory Board – knowledge of accounting and risk management basics. 1. Profile of skills and expertise for the entire Supervisory Board 3. Independence In addition to the expertise-related requirements for the individual members, the following shall The GCGC defines a person as independent, who, in particular, does not have any business or apply with respect to expertise and experience of the entire Supervisory Board: personal relations with Allianz SE or its executive bodies, a controlling shareholder, or an enterprise – familiarity of members in their entirety with the insurance and financial services sector; associated with the latter, which may cause a substantial and not merely temporary conflict of – adequate expertise of the entire board with respect to investment management, insurance interest. actuarial practice, and accounting; To further specify the definition of independence, the Supervisory Board of Allianz SE states the – at least one member with considerable experience in the insurance and financial services fields; following: – at least one member with comprehensive expertise in the fields of accounting or auditing; – specialist expertise or experience in other economic sectors; – Former members of the Allianz SE Board of Management shall not be deemed independent during – managerial or operational experience. the mandatory corporate law cooling-off period. – Members of the Supervisory Board of Allianz SE in office for more than 15 years shall not be 2. Diversity concept deemed independent. To promote an integrative cooperation among the Supervisory Board members, the Supervisory – Regarding employee representatives, the mere fact of employee representation and the existence Board aims at an adequate diversity with respect to gender, internationality, different occupational of a working relationship with the company shall not in itself affect the independence of the backgrounds, professional expertise, and experience: employee representatives. – The Supervisory Board shall be composed of at least 30 % women and at least 30 % men. The Applying such definition, at least eight members of the Supervisory Board shall be independent. In representation of women is generally considered to be the joint responsibility of the shareholder case shareholder representatives and employee representatives are viewed separately, at least four and employee representatives. members respectively should be independent. – At least four of the members must, on the basis of their origin or function, represent regions or cultural areas in which Allianz SE conducts significant business. It has to be considered that the possible emergence of conflicts of interests in individual cases cannot For Allianz SE as a Societas Europaea, the agreement concerning the participation of employees in generally be excluded. Potential conflicts of interest must be disclosed to the Chairman of the Allianz SE provides the following: Allianz employees from different EU member states be Supervisory Board and will be resolved by appropriate measures. considered in the allocation of employee representatives’ Supervisory Board seats. – In order to provide the Board with the most diverse sources of experience and specialist 4. Time of availability knowledge possible, the members of the Supervisory Board shall complement each other with Each member of the Supervisory Board must ensure that they have sufficient time to dedicate to the respect to their background, professional experience, and specialist knowledge.” proper fulfilment of the mandate of this Supervisory Board position. In addition to the mandatory mandate limitations and the GCGC recommendation for active Management Board members of listed companies (max. three mandates) the common capital markets requirements shall be considered. With respect to the Allianz SE mandate, the members shall ensure that – they can attend at least four, usually six ordinary Supervisory Board meetings per year, each of which requires adequate preparation; – they have sufficient time for the audit of the annual and consolidated financial statements; – they can attend the General Meeting;

32 Annual Report 2017 – Allianz SE B _ Management Report of Allianz SE

The composition of the Supervisory Board of Allianz SE reflects these Accounting and auditing objectives. According to the assessment by the Supervisory Board, all shareholder representatives, i.e. Ms. Boissard, Ms. Bosse as well as Mr. The Allianz Group prepares its accounts according to § 315e of the Diekmann, Dr. Eichiner, Mr. Hainer and Mr. Snabe, are independent German Commercial Code (“Handelsgesetzbuch – HGB”) on the within the meaning of the objectives (see No. I.3.). With four female basis of International Financial Reporting Standards (IFRS) as Supervisory Board members, the current legislation for equal partici- adopted within the European Union. The annual financial statements pation of women and men in leadership positions (statutory gender of Allianz SE are prepared in accordance with German law, in par- quota of 30 %) is being met. In addition, the Supervisory Board has ticular the HGB. five members with international backgrounds. The skills profile is also In compliance with special legal provisions that apply to insur- met by all current members of the Supervisory Board. The current ance companies, the auditor of the annual financial statements and composition of the Supervisory Board and its committees is described of the half-yearly financial report is appointed by the Supervisory on page 5. Board, not by the AGM. The audit of the financial statements covers the individual financial statements of Allianz SE and also the consoli- dated financial statements of the Allianz Group. Directors’ dealings To ensure maximum transparency, we inform our shareholders, financial analysts, the media, and the general public about the com- Members of the Board of Management and the Supervisory Board are pany’s situation on a regular basis and in a timely manner. The annu- obliged by the E.U. Market Abuse Directive to disclose to both Allianz SE al financial statements of Allianz SE, the Allianz Group’s consolidated and the German Federal Financial Supervisory Authority any transac- financial statements, and the respective management reports are tions involving shares or debt securities of Allianz SE or financial deriva- published within 90 days of the end of each financial year. Additional tives or other instruments based on them, as soon as the value of the information is provided in the Allianz Group’s half-yearly financial securities acquired or divested by the member amounts to five thousand reports and quarterly statements. Information is also made available Euros or more within a calendar year. These disclosures are published on at the AGM, at press and analysts’ conferences, as well as on the our website at www.allianz.com/directorsdealings. Allianz Group’s website. Our website also provides a financial calen- dar listing the dates of major publications and events, such as annual reports, half-yearly financial reports and quarterly statements, AGMs Annual General Meeting as well as analyst conference calls and financial press conferences. You can find the 2018 financial calendar on our website at Shareholders exercise their rights at the Annual General Meeting. www.allianz.com/financialcalendar. When adopting resolutions, each share carries one vote. Sharehold- ers can follow the AGM’s proceedings on the internet and be repre- sented by proxies. These proxies exercise voting rights exclusively on Regulatory requirements the basis of instructions given by the shareholder. Shareholders are also able to cast their votes via the internet in the form of online The regulatory requirements for corporate governance applicable for voting. Allianz SE regularly promotes the use of internet services. insurance companies, insurance groups, and financial conglomerates The AGM elects the shareholder representatives of the Supervi- are additionally important. Specifically, they include the establish- sory Board and approves the actions taken by the Board of Man- ment and further design of significant control functions (risk man- agement and the Supervisory Board. It decides on the use of profits, agement, actuarial function, compliance, and internal audit) as well capital transactions, the approval of intercompany agreements, the as general principles for a sound business organization. The regulato- remuneration of the Supervisory Board, and changes to the compa- ry requirements are applicable throughout the Group in principle and ny’s Statutes. In accordance with European regulations and the Stat- have been implemented using written guidelines issued by the Board utes, changes to the Statutes require a two-thirds majority of votes of Management of Allianz SE. Since the 2016 financial year, a market cast in case less than half of the share capital is represented in the value balance sheet has to be prepared at solo and group level, AGM. Each year, an ordinary AGM takes place at which the Board of which has to be examined and reported on separately by the audi- Management and Supervisory Board give an account of the preced- tors. Details on the implementation of the regulatory requirements for ing financial year. For special decisions, the German Stock Corpora- corporate governance by Allianz SE and by the Allianz Group can be tion Act provides for the convening of an extraordinary AGM. found in the Solvency and Financial Condition Report of Allianz SE and of the Allianz Group, which are published on our website at www.allianz.com/sfcr.

Annual Report 2017 – Allianz SE 33 B _ Management Report of Allianz SE

STATEMENT ON CORPORATE MANAGEMENT PURSUANT TO § 289f OF THE HGB

The Statement on Corporate Management pursuant to § 289f of the comprehensive risk and control management system regularly also German Commercial Code (“Handelsgesetzbuch – HGB”) forms part assesses the effectiveness and the appropriateness of the internal of the Management Report. According to § 317 (2), sentence 6 of the control system as part of the System of Governance. For further in- HGB, this Statement does not have to be included within the scope of formation on the risk organization and risk principles, please refer to the audit. page 19. Information on the internal Controls over Financial Re- porting you will find on page 51. In addition, the quality of the internal control system is assessed Declaration of Conformity with the German by the Internal Audit Function. It conducts independent, objective Corporate Governance Code assurance and consulting activities, analyzing the structure and effi- cienccy of the internal control systems as a whole. In addition, it also On 14 December 2017, the Board of Management and the Super- examines the potential for additional value and improvement of our visory Board issued the following Declaration of Conformity of organization’s operations. Fully compliant with all international audit- Allianz SE with the German Corporate Governance Code (hereinaf- ing principles and standards, Internal Audit contributes to the evalua- ter the “Code”): tion and improvement of the effectiveness of the risk management, control and governance processes. Therefore, internal audit activities

Declaration of Conformity in accordance with § 161 of the German are geared towards helping the company to mitigate risks and fur- Stock Corporation Act ther assist in strengthening its governance processes and structures.

“Declaration of Conformity by the Management Board and the Supervisory Board of Allianz SE with the recommendations of the German Corporate Governance Code COMPLIANCE PROGRAM Commission in accordance with § 161 of the German Stock Corporation Act (AktG) The sustained success of Allianz SE and the Allianz Group is based on the responsible behavior of all employees, who embody trust, respect 1. Allianz SE currently complies with all recommendations of the German Corporate Governance Code (Code) in the version of February 7, 2017 and will comply with them and integrity. The compliance program of Allianz SE is part of the in the future. F central compliance program of Allianz Group. The central compliance

2. Since the last Declaration of Conformity as of December 15, 2016, Allianz SE has function of Allianz SE coordinates the global compliance programs to complied with all recommendations of the German Corporate Governance Code in the ensure that nationally and internationally recognized guidelines and version of May 5, 2015 standards for rules-compliant and value-based corporate govern- Munich, December 14, 2017 ance are supported and followed. These include the principles of the Allianz SE United Nations (UN Global Compact), the Guidelines of the Organi- zation for Economic Cooperation and Development for Multinational For the Board of Management: Enterprises (OECD guidelines), and European and international Signed Oliver Bäte Signed Dr. Helga Jung standards on data and consumer protection, economic and financial For the Supervisory Board: sanctions and combating corruption, bribery, money laundering, and Signed Michael Diekmann” terrorism financing. Through its support for and acceptance of these standards, Allianz aims to avoid the risks that might arise from non- compliance. The central compliance function of Allianz SE is respon-

sible for ensuring – in close cooperation with regional, divisional and In addition, Allianz SE follows all the suggestions of the Code in its local compliance functions – the effective implementation and moni- 7 February 2017 version. toring of the compliance program as well as for investigating poten- The Declaration of Conformity and further information on corpo- tial compliance infringements. rate governance at Allianz can be found on our website at The standards of conduct established by the Code of Conduct www.allianz.com/corporate-governance. for Business Ethics and Compliance are obligatory for all employees. The Code of Conduct is available on our website at www.allianz.com/corporate-governance. Corporate governance practices The Code of Conduct and the internal guidelines derived from it provide all employees with clear guidance on behavior that lives up INTERNAL CONTROL SYSTEMS to the values of the Allianz Group. In order to transmit the principles Allianz SE, as a member of the Allianz Group, has an effective inter- of the Code of Conduct and the internal compliance program based nal risk and control system for verifying and monitoring its operating on these principles, the compliance function of Allianz SE, together activities and business processes, in particular financial reporting, as with regional, divisional, and local compliance functions has imple- well as compliance with regulatory requirements. The requirements mented interactive training programs around the world. These pro- placed on the internal control systems are essential not only for the vide practical guidelines which enable employees to come to their resilience and franchise value of the company, but also to maintain own decisions. The Code of Conduct also forms the basis for guide- the confidence of the capital market, our customers, and the public. A

34 Annual Report 2017 – Allianz SE B _ Management Report of Allianz SE

lines and controls to ensure fair dealings with Allianz Group custom- agement level below the Board of Management comprises a very ers (sales compliance). small comparative group of executives. No suitable female candi- There are legal provisions against corruption and bribery in dates could be identified for the very few positions that became almost all countries in which Allianz has a presence. The global vacant in the period considered. Anti-Corruption Program of the Allianz Group ensures the continu- The following new targets were set for Allianz SE in the 2017 ous monitoring and improvement of the internal anti-corruption financial year: controls. More information on the Anti-Corruption Program can be In August 2017, the Supervisory Board resolved on a new target found in the Sustainability Report on our website at for the percentage of women on Allianz SE’s Board of Management

www.allianz.com/sustainability. at 30 % up until 31 December 2021. As regards the proportion of A major component of the compliance program is a whistle- women on the first and second management levels below the Board blower system that allows employees and third parties to alert the of Management, the Board of Management of Allianz SE has set a compliance department in confidence about any irregularities they target of 20 % and 25 %, respectively, up until 31 December 2018. In observe. No employee voicing concerns about irregularities in good the longer term, Allianz aims to place women in at least 30 % of the faith needs to fear retribution, even if the concerns turn out to be positions at these two management levels throughout the Group. unfounded at a later date. Third parties can contact the compliance department via an electronic mailbox on our website at www.allianz.com/complaint-system. Diversity concepts for the Board of Management

DESCRIPTION OF THE FUNCTIONS OF THE BOARD OF and Supervisory Board MANAGEMENT AND THE SUPERVISORY BOARD AND In accordance with the legislation to implement the European CSR OF THE COMPOSITION AND FUNCTIONS OF THEIR Directive, the diversity concepts for the Board of Management and COMMITTEES the Supervisory Board, their objectives, implementation, and results A description of the composition of the Supervisory Board and its achieved are to be reported on for the first time for the 2017 financial committees can be found on pages 5 and 7 of the Annual Report. year. A description of the composition of the Board of Management can The Supervisory Board stipulated the following diversity concept be found on page 8, while the composition of the Committees of for the Board of Management of Allianz SE in August 2017: the Board of Management is described in the Corporate Governance Report starting on page 29. This information is also available on “For the composition of the Management Board, the Supervisory our website at www.allianz.com/corporate-governance. Board aims for an adequate “Diversity of Minds”. This comprises A general description of the functions of the Board of Manage- broad diversity with regard to gender, internationality as well as ment, the Supervisory Board, and their committees can be found in educational and professional background. the Corporate Governance Report starting on page 29, and on The Supervisory Board assesses the achievement of such target, inter our website at www.allianz.com/corporate-governance. alia, on the basis of the following specific indicators:

− adequate proportion of women on the Management Board: at

Information in accordance with the German Act least 30 % until 31 December 2021; − adequate share of members with an international background on Equal Participation of Women and Men in (e.g. based on origin or extensive professional experience abroad), Executive Positions in the Private and the Public ideally with connection to the regions in which Allianz Group is op- Sector erating; − adequate diversity with regard to educational and professional This section outlines on the targets set by Allianz SE for the Board of background, taking into account the limitations for the Superviso- Management and the two management levels below the Board of ry Board by regulatory requirements (fitness).”

Management. Article 17 (2) of the German SE Implementation Act stipulates that as of 1 January 2016, the share of women and men This diversity concept is implemented in the appointment procedure among the members of the Supervisory Board of Allianz SE must for members of the Board of Management by the Supervisory Board. each total up to 30 % at least. The Supervisory Board currently in It is ensured that lists of successors shall comprise an appropriate office fulfils this requirement because it includes four women (33 %). percentage of female candidates as well as candidates with interna- The targets that had been set up until 30 June 2017 and their tional experience. The Personnel Committee takes this into considera- implementation are dealt with first: tion especially in succession planning. The current composition of the For the Board of Management, the Supervisory Board had set a Board of Management is in accordance with the diversity concept: Its target of 11 % for the percentage of women until 30 June 2017. This share of women is currently 22 %. Six members of the Management target was exceeded with a percentage of women on the Board of Board have international backgrounds. There is an adequate degree

Management of 22 %. For the proportion of women on the two man- of variety as regards educational and professional background. agement levels below the Board of Management, a target of 20 % The diversity concept for the Supervisory Board was approved by had been set. As of 30 June 2017, this target was met for the second the Supervisory Board in August 2017 and included in the objectives management level with a percentage of women of 24 %, but could for the composition of the Supervisory Board (see No. II.2 of the ob- not be met on the first level with a percentage of 17 %. The first man- jectives for the composition of the Supervisory Board on page 32).

Annual Report 2017 – Allianz SE 35 B _ Management Report of Allianz SE

The Supervisory Board pursues these objectives, and thus also the diversity concept, nominating the candidates for the shareholder representatives. As the employee representatives are appointed according to different national provisions, there is only limited poten- tial influence to the selection of employee representatives. The Su- pervisory Board is currently composed in accordance with the diversi- ty concept. For details please see the Corporate Governance Report on page 29.

36 Annual Report 2017 – Allianz SE B _ Management Report of Allianz SE

REMUNERATION REPORT

This remuneration report covers the remuneration arrangements for REMUNERATION STRUCTURE, the Board of Management and the Supervisory Board of Allianz SE. COMPONENTS AND TARGET SETTING PROCESS The complete information on Allianz SE Board of Management There are four remuneration components in total, which all have the remuneration as given below and additional information is provided same weighting: the base salary and three variable components – on our remuneration website at www.allianz.com/remuneration. the annual bonus, the annualized mid-term bonus, and the equity- related remuneration. The target level of each of the variable com- ponent does not exceed the base salary, so the total target variable Allianz SE Board of Management remuneration compensation is three times the base salary at maximum.

GOVERNANCE SYSTEM BASE SALARY The remuneration of the Board of Management is decided upon by The base salary is not performance-based. It is paid in twelve month- the entire Supervisory Board, based on proposals prepared by the ly installments. Personnel Committee. If required, outside advice is sought from inde- pendent external consultants. The Personnel Committee and the VARIABLE REMUNERATION Supervisory Board consult with the Chairman of the Board of Man- The variable remuneration (annual bonus, mid-term bonus, and agement, as appropriate, in assessing the performance and remu- equity-related compensation) is designed to reward performance. A neration of Board of Management members. However, the Chairman shortfall of targets may result in the variable compensation dropping of the Board of Management is not present when his own remunera- to zero. Two thirds of the variable compensation are a deferred pay- tion is discussed. out after three or four years. Claw-back clauses for compensation Regarding the activities and decisions taken by the Personnel components already paid do not exist because according to the Committee and the Supervisory Board, please refer to the Supervisory governing German labor law, the enforceability of claw-back clauses Board Report starting on page 2. is subject to major legal restrictions. On the other hand, the payout of variable remuneration is subject

REMUNERATION PRINCIPLES to a limit and capped at 150 % of the respective target levels for the

Key principles underlying the Board of Management remuneration annual bonus and the mid-term bonus, as well as at a 200 % increase are as follows: in value of the grant price for the equity-related remuneration. Variable remuneration components may not be paid, or pay- − Alignment of pay and performance: The performance-based, ment may be restricted, in the case of a breach of the Allianz Code of variable component shall form a significant portion of the overall Conduct or regulatory Solvency II policies or standards, including risk remuneration. limits. Additionally, a reduction or cancellation of variable remunera- − Variable remuneration focused on sustainability and aligned tion may occur if the supervisory authority (BaFin) requires this in with shareholder interests: A major part of the variable remu- accordance with its statutory powers. neration shall reflect longer-term performance with an adequate deferred payout. Furthermore, a substantial portion shall reward Annual bonus the sustained performance of the share price. The annual bonus depends on performance in the respective finan- − Support of the Group’s strategy: The design of the performance cial year, and is paid out in the following financial year. The target targets must reflect the Allianz Group’s business strategy. level of the annual bonus corresponds to the base salary. Perfor- mance targets comprise Group and individual targets. Group targets In light of the above, the Supervisory Board determines the structure, include – equally weighted – operating profit and net income. Indi- weighting, and level of each remuneration component. In addition, vidual performance is assessed against qualitative as well as respon- the Supervisory Board regularly deals with the appropriateness of the sibility-related quantitative targets. Board of Management’s remuneration. For this purpose, we include, For Board of Management members with business division re- amongst others, remuneration survey data of DAX 30 companies and sponsibilities, individual quantitative targets comprise operating international competitors from external consultants. Compensation profit, net income, Property-Casualty revenues, and Life new-business levels are oriented towards the third quartile of that peer group, value. For Board of Management members with a functional focus, given Allianz’s relative size, complexity, and sustained performance division-specific quantitative targets are determined based on their within that group. Furthermore, when reviewing the adequateness key responsibilities. and appropriateness of the Board of Management’s remuneration, As part of the assessment of the individual qualitative target the Supervisory Board takes into account the development of the achievement, the personal contribution to the Renewal Agenda is Board’s remuneration in relation to other remuneration levels within reviewed alongside behavioral aspects. The latter is framed in a com- the Allianz Group. mon standard ("People Letter") designed to drive necessary change across the Allianz Group, and comprises of customer orientation, col- laborative leadership, entrepreneurship, and trust (e.g. with regard to sustainability, corporate social responsibility, and diversity as well as integrity).

Annual Report 2017 – Allianz SE 37 B _ Management Report of Allianz SE

To support the assessment of the individual qualitative behavioral during the vesting period. The expected dividend stream is discount- targets, a so-called multi-rater process has been introduced: Each ed with the swap rates as of the valuation day. Following the end of member of the Board of Management collects, amongst others, the four-year vesting period, the company makes a cash payment feedback from his or her fellow Board members and his or her direct based on the number of RSUs granted, as well as on the ten-day reports as well as the CEOs of the most important operating entities average Xetra closing price of the Allianz stock following the annual he or she is in charge of. Furthermore, they perform a self-assessment. financial press conference in the year of expiry of the respective RSU Based on the 2017 target achievement for the Group as a whole plan. To avoid extreme payouts, the RSU payout level is capped at 2 and for the respective business division(s) and/or corporate func- 200 % of the grant price . Outstanding RSU holdings are forfeited, tion(s) as well as the qualitative performance achieved, total annual should a Board member leave at his/her own request or be terminat- bonus awards range from 111 % to 124 % of the target bonus, while ed for cause. the average bonus award amounts to 117 % of the target. PENSIONS AND SIMILAR BENEFITS Mid-term bonus (MTB) To provide competitive and cost-effective retirement and disability The mid-term bonus is a variable compensation component with a benefits, company contributions to the current pension plan “My deferred payout following a three-year cycle. Sustainable and value- Allianz Pension” are invested in a fund with a guarantee for the con- adding performance is assessed against a predefined criteria tributions paid, but no further interest guarantee. Upon retirement, catalog. The current MTB cycle runs from 2016 until 2018 and is the accumulated capital is paid out as a lump sum or, alternatively, based on the following measurable sustainability criteria: can be converted into a lifetime annuity. Each year the Supervisory Board decides whether and to what extent a budget is provided, also “Performance” taking into account the target pension level. This budget includes a − Sustainable improvement/stabilization of return on equity (ex- risk premium paid to cover death and disability. The earliest age a cluding unrealized gains/losses on bonds, net of shadow ac- pension can be drawn is 62, except for cases of occupational or counting), general disability for medical reasons. In these cases, it may become − Compliance with economic capitalization guidance (capitaliza- payable earlier and an increase by projection may apply. In the case tion level and volatility limit). of death, a lump sum – again convertible into an annuity – will be paid to dependents. Should Board membership cease before retire- “Health” (in line with the Renewal Agenda) ment age for other reasons, the accrued pension rights are main- − True Customer Centricity, tained if vesting requirements are met. − Digital by Default, For members of the Allianz SE Board of Management who were − Technical Excellence, born before 1 January 1958 and for the rights accrued before 2015,

− Growth Engines, the guaranteed minimum interest rate remains at 2.75 % and the − Inclusive Meritocracy (including gender diversity and women in retirement age is still 60. leadership). From 1 January 2005 until 31 December 2014, most Board of Man- agement members participated in a contribution-based system which For the MTB, an amount is typically accrued that is identical to the was frozen as of 31 December 2014, now only covering disability and annual bonus. However, the accrual as such may be subject to ad- death. Before 2005, a defined benefit plan provided fixed benefits not justments, for example, if it is foreseeable that the mid-term sustaina- linked to base salary increases. Benefits generated under this plan were bility criteria are not met or exceeded. The annual accrual is capped frozen at the end of 2004. Additionally, most Board members participat- at 150 % of the respective target level. ed in Allianz Versorgungskasse VVaG (AVK), a contribution-based pen- sion plan, and in Allianz Pensionsverein e.V. (APV), both these plans were Equity-related remuneration closed for new entries on 1 January 2015. Equity-related remuneration is a virtual share award referred to as “Restricted Stock Units” (RSUs) with a deferred payout after four PERQUISITES years. The grant value of the RSUs allocated equals the annual bonus Perquisites mainly consist of contributions to accident and liability of the previous year, i.e. the grant value is also capped at 150 % of the insurances and the provision of a company car. Perquisites are not respective target level. The number of RSUs allocated is derived by linked to performance. Each member of the Board of Management is dividing the grant value by the fair market value of an RSU at the responsible for paying the income tax due on these perquisites. The time of grant. Supervisory Board regularly reviews the level of perquisites. The fair market value is calculated based on the ten-trading-day average Xetra closing price of the Allianz stock for the ten days fol- REMUNERATION FOR 2017 lowing the financial press conference where our annual results are The following remuneration disclosure, which is based on and com- publicized. As RSUs are virtual stock without dividend payments pliant with the German Corporate Governance Code, shows the during the vesting period, the average Xetra closing price is reduced1 individual Board members’ remuneration for 2016 and 2017 includ- by the net present value of the expected future dividend payments ing fixed and variable remuneration and pension service cost. The

1_In addition, the fair market value of the RSUs is subject to a small reduction of a few Euro cents due to the 200 % cap on 2_The relevant share price used to determine the final number of RSUs granted and the 200 % cap is available only after the RSU payout. This reduction is calculated based on a standard option pricing formula. sign-off by the external auditors.

38 Annual Report 2017 – Allianz SE B _ Management Report of Allianz SE

“Grant” column below shows the remuneration at target, minimum, All variable components are granted in accordance with the and maximum levels. The “Payout” column discloses the 2016 and rules and conditions of the “Allianz Sustained Performance Plan” 2017 payments. The base salary, annual bonus, and perquisites are (ASPP). Depending on individual and company performance, the linked to the reported performance years, 2016 and 2017, whereas amounts actually paid can vary between 0 % and 150 % of the respec- the Group Equity Incentive (GEI) and Allianz Equity Incentive (AEI) tive target levels. If performance is rated at 0 % no variable compo- payouts result from grants related to the performance years 2010, nent will be granted. Consequently, the minimum total direct com- 2012 and 2013. To enhance transparency of the remuneration relat- pensation for a regular member of the Board of Management will ed to the performance year 2017, the additional column “Actual equal the base salary of € 750 thou (excluding perquisites and pen- grant” includes the 2017 fixed compensation, the annual bonus paid sion contributions), while the maximum total direct compensation for 2017, the MTB 2016 – 2018 tranche accrued for the performance (excluding perquisites and pension contributions) is € 4,125 thou: a year 2017, and the fair value of the RSU grant value for the perfor- € 750 thou base salary plus € 3,375 thou (i.e., 150 % of the sum of all mance year 2017. three variable compensation components at target level). The CEO’s maximum total direct compensation (excluding perquisites and pension contributions) is € 6,188 thou: a € 1,125 thou base salary plus

€ 5,063 thou (150 % of the sum of all three variable compensation components at target level).

Annual Report 2017 – Allianz SE 39 B _ Management Report of Allianz SE

Individual remuneration: 2017 and 2016 € thou (total might not sum up due to rounding)

Oliver Bäte (Appointed: 01/2008; CEO since 05/2015) Actual Grant grant Payout1 2016 2017 2017 2016 2017 Target Target Min Max Base salary 1,125 1,125 1,125 1,125 1,125 1,125 1,125 Perquisites 30 32 32 32 32 30 32 Total fixed compensation 1,155 1,157 1,157 1,157 1,157 1,155 1,157 Annual variable compensation Annual bonus 1,125 1,125 - 1,688 1,384 1,474 1,384

Deferred compensation MTB (2016 - 2018)2 1,125 1,125 - 1,688 1,384 - - AEI 2018/RSU3 - 1,125 - 1,688 1,384 - - AEI 2017/RSU3 1,125 ------AEI 2013/RSU3 ------1,820 AEI 2012/RSU3 - - - - - 1,334 - GEI 2010/SAR4 ------Total 4,530 4,532 1,157 6,221 5,308 3,963 4,361 Pensions service cost5 625 622 622 622 622 625 622 Total 5,155 5,154 1,779 6,843 5,930 4,588 4,983

1_In accordance with the German Corporate Governance Code, the annual bonus disclosed for performance year 2017 is paid in 2018 and for performance year 2016 in 2017. The payments for equity-related deferred compensation (GEI and AEI), however, are disclosed for the year in which the actual payment was made. 2_The MTB figure included in the Actual Grant column shows the annual accrual. 3_Payout is capped at 200 % above grant price. The relevant share price used to determine the fair market value, and hence the final number of RSUs granted, and the 200 % cap are only available after sign-off by the external auditors. 4_The equity-related remuneration that applied before 2010 consisted of two vehicles, virtual stock awards known as RSUs and virtual stock options known as “Stock Appreciation Rights” (SAR). Only RSUs have been awarded as of 1 January 2010. The remuneration system valid until December 2009 is disclosed in the Annual Report 2009 (starting on page 17). Whereas the RSU grants are automatically exercised at the vesting date, the GEI/SAR grants are exercised by the Board member within the exercise period following the vesting date. Hence the total payout from SARs depends on the individual decision by the Board member. SARs are released to plan participants upon expiry of the vesting period, assuming all other exercise hurdles are met. For SARs granted until and including 2008, the vesting period was two years and the exercise period five years. SARs can be exercised on the condition that the price of the Allianz SE stock is at least 20 % above the strike price at the time of grant. During the term of the plan, at least once on five consecutive trading days the Allianz SE stock must relatively appreciate at least 0.01 percentage points ahead of the appreciation of the Dow Jones EURO STOXX Price Index (600). 5_Pension service cost in accordance with IAS 19: represents the company cost not the actual entitlement nor a payment, however, according to the German Corporate Governance Code the Pension Service Cost is to be included in all columns.

40 Annual Report 2017 – Allianz SE B _ Management Report of Allianz SE

Sergio Balbinot (Appointed: 01/2015)6 Jacqueline Hunt (Appointed: 07/2016)7 Actual Actual Grant grant Payout1 Grant grant Payout1 2016 2017 2017 2016 2017 2016 2017 2017 2016 2017 Target Target Min Max Target Target Min Max 750 750 750 750 750 750 750 375 750 750 750 750 375 750 32 22 22 22 22 32 22 1368 18 18 18 18 1368 18 782 772 772 772 772 782 772 511 768 768 768 768 511 768

750 750 - 1,125 932 983 932 377 750 - 1,125 923 456 923

750 750 - 1,125 932 - - 377 750 - 1,125 923 - - - 750 - 1,125 932 - - - 750 - 1,125 923 - - 750 ------377 ------3,032 3,022 772 4,147 3,568 1,765 1,704 1,642 3,018 768 4,143 3,536 967 1,691 365 374 374 374 374 365 374 159 317 317 317 317 159 317 3,397 3,396 1,146 4,521 3,942 2,130 2,078 1,801 3,335 1,085 4,460 3,853 1,126 2,008

6_In addition to the amounts disclosed in the table, Sergio Balbinot received a buyout award of € 6 mn to compensate for forfeited grants from his previous employer: € 3 mn in cash and € 3 mn in RSUs. 50 % of the cash amount was paid in February 2015 and 50 % was paid in 2016 and are subject to clawback. 7_Jacqueline Hunt joined Allianz on 1 July 2016. She received a pro-rated base salary, annual bonus, MTB tranche, and equity-related compensation. The different pro-rated amounts for base salary and target amounts result from different pro-rating methodologies, which are generally applied. In addition to the amounts disclosed in the table, Jacqueline Hunt received a buyout award of € 170 thou in 2016 to compensate for forfeited grants from her previous employer. 8_Jacqueline Hunt received an off-cycle one-time payment of € 120 thou to reimburse her for relocation cost.

Annual Report 2017 – Allianz SE 41 B _ Management Report of Allianz SE

Individual remuneration: 2017 and 2016 € thou (total might not sum up due to rounding)

Dr. Helga Jung (Appointed: 01/2012) Actual Grant grant Payout1 2016 2017 2017 2016 2017 Target Target Min Max Base salary 750 750 750 750 750 750 750 Perquisites 14 14 14 14 14 14 14 Total fixed compensation 764 764 764 764 764 764 764 Annual variable compensation Annual bonus 750 750 - 1,125 866 889 866

Deferred compensation MTB (2016 - 2018)2 750 750 - 1,125 866 - - AEI 2018/RSU3 - 750 - 1,125 866 - - AEI 2017/RSU3 750 ------AEI 2013/RSU3 ------1,649 AEI 2012/RSU3 ------GEI 2010/SAR4 ------Total 3,014 3,014 764 4,139 3,363 1,653 3,279 Pensions service cost5 420 431 431 431 431 420 431 Total 3,434 3,445 1,195 4,570 3,794 2,073 3,710

Dr. Axel Theis (Appointed: 01/2015) Actual Grant grant Payout1 2016 2017 2017 2016 2017 Target Target Min Max Base salary 750 750 750 750 750 750 750 Perquisites 28 27 27 27 27 28 27 Total fixed compensation 778 777 777 777 777 778 777 Annual variable compensation Annual bonus 750 750 - 1,125 885 973 885

Deferred compensation MTB (2016 - 2018)2 750 750 - 1,125 885 - - AEI 2018/RSU3 - 750 - 1,125 885 - - AEI 2017/RSU3 750 ------AEI 2013/RSU3 ------AEI 2012/RSU3 ------GEI 2010/SAR4 ------Total 3,028 3,027 777 4,152 3,432 1,751 1,662 Pensions service cost5 482 501 501 501 501 482 501 Total 3,510 3,528 1,278 4,653 3,933 2,233 2,163

1_In accordance with the German Corporate Governance Code, the annual bonus disclosed for performance year 2017 is paid in 2018 and for performance year 2016 in 2017. The payments for equity-related deferred compensation (GEI and AEI), however, are disclosed for the year in which the actual payment was made. 2_The MTB figure included in the Actual Grant column shows the annual accrual. 3_Payout is capped at 200 % above grant price. The relevant share price used to determine the fair market value, and hence the final number of RSUs granted, and the 200 % cap are only available after sign-off by the external auditors. 4_The equity-related remuneration that applied before 2010 consisted of two vehicles, virtual stock awards known as RSUs and virtual stock options known as “Stock Appreciation Rights” (SAR). Only RSUs have been awarded as of 1 January 2010. The remuneration system valid until December 2009 is disclosed in the Annual Report 2009 (starting on page 17). Whereas the GEI/RSU grants are automatically exercised at the vesting date, the GEI/SAR grants are exercised by the Board member within the exercise period following the vesting date. Hence the total payout from SARs depends on the individual decision by the Board member. SARs are released to plan participants upon expiry of the vesting period, assuming all other exercise hurdles are met. For SARs granted until and including 2008, the vesting period was two years and the exercise period five years. SARs can be exercised on the condition that the price of the Allianz SE stock is at least 20 % above the strike price at the time of grant. During the term of the plan, at least once on five consecutive trading days the Allianz SE stock must relatively appreciate at least 0.01 percentage points ahead of the appreciation of the Dow Jones EURO STOXX Price Index (600). 5_Pension service cost in accordance with IAS 19: represents the company cost not the actual entitlement nor a payment, however, according to the German Corporate Governance Code the Pension Service Cost is to be included in all columns.

42 Annual Report 2017 – Allianz SE B _ Management Report of Allianz SE

Dr. Christof Mascher (Appointed: 09/2009) Dr. Günther Thallinger (Appointed: 01/2017) Actual Actual Grant grant Payout1 Grant grant Payout1 2016 2017 2017 2016 2017 2016 2017 2017 2016 2017 Target Target Min Max Target Target Min Max 750 750 750 750 750 750 750 - 750 750 750 750 - 750 2 11 11 11 11 2 11 - 2 2 2 2 - 2 752 761 761 761 761 752 761 - 752 752 752 752 - 752

750 750 - 1,125 829 870 829 - 750 - 1,125 857 - 857

750 750 - 1,125 829 - - - 750 - 1,125 857 - - - 750 - 1,125 829 - - - 750 - 1,125 857 - - 750 ------1,619 ------1,155 ------645 ------3,002 3,011 761 4,136 3,247 2,777 3,854 - 3,002 752 4,127 3,323 - 1,609 418 428 428 428 428 418 428 - 318 318 318 318 - 318 3,420 3,439 1,189 4,564 3,675 3,195 4,282 - 3,320 1,070 4,445 3,641 - 1,927

Dr. Dieter Wemmer (Appointed: 01/2012 - End of Service: 12/2017) Dr. Werner Zedelius (Appointed: 01/2002 - End of Service: 12/2017)6 Actual Actual Grant grant Payout1 Grant grant Payout1 2016 2017 2017 2016 2017 2016 2017 2017 2016 2017 Target Target Min Max Target Target Min Max 750 750 750 750 750 750 750 750 750 750 750 750 750 750 15 46 46 46 46 15 46 18 33 33 33 33 18 33 765 796 796 796 796 765 796 768 783 783 783 783 768 783

750 750 - 1,125 866 954 866 750 750 - 1,125 829 954 829

750 750 - 1,125 866 - - 750 750 - 1,125 829 - - - 750 - 1,125 866 - - - 750 - 1,125 829 - - 750 ------750 ------1,843 ------1,725 ------1,083 ------3,015 3,046 796 4,171 3,395 1,719 3,505 3,018 3,033 783 4,158 3,269 2,805 3,337 479 499 499 499 499 479 499 661 721 721 721 721 661 721 3,494 3,545 1,295 4,670 3,894 2,198 4,005 3,679 3,754 1,504 4,879 3,990 3,466 4,057

6_Dr. Werner Zedelius left the Allianz SE Board of Management upon his retirement effective 31 December 2017. According to his contract he receives a transition payment of € 937.5 thou. The payment is calculated based on the latest base salary, which is paid for a further six months starting 1 July 2018, and a final lump-sum payment of 25 % of the target variable remuneration. The payable pension takes into account the monthly payments over the six-month period. The lump-sum payment will be paid in spring 2019.

Annual Report 2017 – Allianz SE 43 B _ Management Report of Allianz SE

GERMAN ACCOUNTING STANDARD 17 DISCLOSURE PENSIONS

Under the German Accounting Standard 17, the total remuneration Company contributions for the current pension plan are set at 50 % to be disclosed for 2017 (2016 in parenthesis) is defined differently as of the base salary, reduced by an amount covering the disability compared to the German Corporate Governance Code: It is and death risk. They are invested in a fund and include a guarantee composed of the base salary, perquisites, the annual bonus, and the for the contributions paid, but no further interest guarantee (for fair value of the RSU grant, but excludes both the notional annual members of the Board of Management who were born before accruals of the MTB 2016 – 2018 and the pension service cost: 1 January 1958, the guaranteed minimum interest rate remains at

2.75 % p.a.). For members with pension rights in the frozen defined-

Oliver Bäte € 3,925 (4,103) thou, benefit plan, the above contribution rates are reduced by 19 % of the

Sergio Balbinot € 2,636 (2,747) thou, expected annual pension from that frozen plan. The Allianz Group

Jacqueline Hunt € 2,613 (1,423) thou, paid € 4 mn (2016: € 5 mn) to increase reserves for pensions and

Dr. Helga Jung € 2,497 (2,542) thou, similar benefits for active members of the Board of Management. As

Dr. Christof Mascher € 2,419 (2,492) thou, of 31 December 2017, reserves for pensions and similar benefits for

Dr. Günther Thallinger € 2,466 (-) thou, active members of the Board of Management amounted to € 41 mn

Dr. Axel Theis € 2,547 (2,724) thou, (2016: € 44 mn).

Dr. Dieter Wemmer € 2,529 (2,674) thou,

Dr. Werner Zedelius € 2,441 (2,677) thou.

The sum total of the remuneration of the Board of Management for 2017 – excluding the notional accruals of the MTB 2016 – 2018 as well as the pension service cost, as outlined above – amounts to € 24 mn (2016: € 26 mn). If pension service cost is included, the sum total is € 28 mn (2016: € 30 mn).

EQUITY-RELATED REMUNERATION In accordance with the approach described earlier, in March 2018 a number of RSUs were granted to each member of the Board of Man- agement, which will vest and be settled in 2022.

Grants and outstanding holdings under the Allianz Equity Program

Board members RSU Number of RSU Number of RSU granted on 2/3/20181 held at 31/12/20171 Oliver Bäte 8,164 40,714 Sergio Balbinot 5,498 41,479 Jacqueline Hunt 5,443 3,417 Dr. Helga Jung 5,111 28,696 Dr. Christof Mascher 4,890 30,623 Dr. Günther Thallinger 5,056 11,517 Dr. Axel Theis 5,222 25,902 Dr. Dieter Wemmer 5,111 33,701 Dr. Werner Zedelius 4,890 33,311 Total 49,385 249,360

1_The relevant share price used to determine the fair market value, and hence the final number of RSUs granted, is only available after sign-off of the Annual Report by the external auditors, thus numbers are based on a best estimate. As disclosed in the Annual Report 2016, the equity-related grant in 2017 was made to participants as part of their 2016 remuneration. The disclosure in the Annual Report 2016 was based on a best estimate of the RSU grants. The actual grants deviated from the estimated values and have to be disclosed accordingly. The actual RSU grants as of 3 March 2017 under the Allianz Equity Incentive are as follows: Oliver Bäte: 11,038, Sergio Balbinot: 7,359, Jacqueline Hunt: 3,417, Dr. Helga Jung: 6,657, Dr. Christof Mascher: 6,516, Dr. Axel Theis: 7,289, Dr. Dieter Wemmer: 7,148, Dr. Werner Zedelius: 7,148.

44 Annual Report 2017 – Allianz SE B _ Management Report of Allianz SE

Individual pensions: 2017 and 2016 € thou (total might not sum up due to rounding)

Contribution-based Defined benefit pension plan pension plan Transition (frozen) (frozen)1 Current pension plan AVK/APV2 payment3 Total Expected annual pension Board of Management payment4 SC5 DBO6 SC5 DBO6 SC5 DBO6 SC5 DBO6 SC5 DBO6 SC5 DBO6 Oliver Bäte 2017 - - - 45 3,149 536 1,385 6 36 36 675 622 5,245 2016 - - - 33 3,063 536 818 5 36 51 594 625 4,511 Sergio Balbinot 2017 - - - 14 28 357 961 3 6 - 1 374 995 2016 - - - 5 39 357 582 2 4 - 1 365 626 Jacqueline Hunt 2017 - - - - - 317 472 - - - - 317 472 2016 - - - - - 159 159 - - - - 159 159 Dr. Helga Jung 2017 62 59 1,429 19 1,863 345 924 8 204 - - 431 4,421 2016 62 54 1,347 12 1,813 345 558 8 159 - - 420 3,878 Dr. Christof Mascher 2017 - - - 26 3,208 357 1,018 5 42 40 646 428 4,914 2016 - - - 12 3,115 357 637 5 42 43 583 418 4,377 Dr. Günther Thallinger 2017 - - - 27 1,311 284 570 7 32 - - 318 1,914 2016 ------Dr. Axel Theis 2017 120 114 3,332 16 2,537 334 889 11 283 25 768 501 7,810 2016 120 107 3,422 6 2,528 334 535 9 233 25 774 482 7,493 Dr. Dieter Wemmer 2017 - - - 497 2,339 - - 2 11 - - 499 2,350 2016 - - - 477 1,832 - - 2 10 - - 479 1,842 Dr. Werner Zedelius 2017 225 221 6,711 466 5,671 - - 11 246 23 716 721 13,344 2016 225 207 6,385 431 5,090 - - 9 222 14 678 661 12,375

1_The service cost of the frozen contribution-based pension plan reflects the continued death and disability cover. 2_Plan participants contribute 3 % of their relevant salary to the AVK. For the AVK the minimum guaranteed interest rate is 2.75 % – 3.50 % depending on the date of joining Allianz. In general, the company funds the balance required via the APV. Before Allianz’s founding of the APV in 1998, both Allianz and the plan participants were contributing to the AVK. 3_For details on the transition payment, see section “Termination of service”. In any event a death benefit is included. 4_Expected annual pension payment at assumed retirement age (age 60), excluding current pension plan. 5_SC = service cost. Service costs are calculatory costs for the DBO related to the reported business year. 6_DBO = defined benefit obligation, end of year. The figures show the obligation for Allianz resulting from defined benefit plans, taking into account realistic assumptions with regard to interest rate, dynamics, and biometric probabilities.

In 2017, former members of the Board of Management and their which a shareholder of Allianz SE, acting alone or together with oth- dependents received remuneration and other benefits totaling er shareholders, holds more than 50 % of voting rights in Allianz SE). € 7 mn (2016: € 7 mn), while reserves for current pension obligations and accrued pension rights totaled € 131 mn (2016: € 119 mn). Contracts do not contain provisions for any other cases of early ter- mination of Board of Management service. LOANS TO MEMBERS OF THE BOARD OF Board members who were appointed before 1 January 2011 are MANAGEMENT eligible to continue using a company car for up to one year after As of 31 December 2017, there were no outstanding loans granted by retirement. Allianz Group companies to members of the Board of Management. TERMINATION OF SERVICE – TERMINATION OF SERVICE DETAILS OF THE PAYMENT ARRANGEMENTS Board of Management contracts are limited to a period of five years. For new appointments a shorter period is typical, a practice in line Transition payment (appointment before 1 January 2010) with the German Corporate Governance Code. Board members who receive a transition payment are subject to a six-month non-compete clause. Arrangements for termination of service including retirement are as The transition payment comprises an amount corresponding to follows: the most recent base salary, covering a period of six months, plus

25 % of the target variable remuneration at the notice date. A Board 1. Board members who were appointed before 1 January 2010, and member with a base salary of € 750 thou would receive a maximum who have served a minimum of five years, are eligible for a six- of € 937.5 thou. month transition payment after leaving the Board of Manage- Where an Allianz pension is immediately payable, transition pay- ment. ment amounts are offset against it. 2. Severance payments made to Board members in case of early termination comply with the German Corporate Governance Code. Severance payment cap 3. Special terms – which are also in accordance with the German Payments for early termination to Board members with a remaining Corporate Governance Code – apply if a Board member’s service term of contract of more than two years are capped at twice the ended as a result of a “change of control” (i.e., if a situation arises in annual compensation – whereby the annual compensation:

Annual Report 2017 – Allianz SE 45 B _ Management Report of Allianz SE

1. is determined based on the previous year’s annual base salary plus REMUNERATION PRINCIPLES

50 % of the target variable remuneration (annual bonus, annual- − Set total remuneration at a level both aligned with the scale and ized MTB, and equity-related remuneration: For a Board member scope of the Supervisory Board’s duties and appropriate in view with a fixed base salary of € 750 thou, the annual compensation of the company’s activities and its business and financial situation. would amount to € 1,875 thou. Hence, he/she would receive a − Establish a remuneration structure that takes into account the maximum severance payment of € 3,750 thou) and individual functions and responsibilities of Supervisory Board 2. shall not exceed the latest year’s actual total compensation. members, such as chair, vice chair, or committee mandates. − Establish a remuneration structure that allows proper oversight of If the remaining term of contract is less than two years, the payment is business as well as independent decisions on executive personnel pro-rated according to the remaining term of the contract. and remuneration.

Change of control REMUNERATION STRUCTURE AND COMPONENTS In case of early termination as a result of a change of control, sever- The remuneration structure, which comprises fixed and committee- ance payments made to Board members generally amount to three related remuneration only, was approved by the Annual General times the annual compensation (as defined above) and shall not Meeting in 2011 and is laid down in the Statutes of Allianz SE. exceed 150 % of the severance payment cap. A Board member with a base salary of € 750 thou would receive a maximum of € 5,625 thou. FIXED ANNUAL REMUNERATION The remuneration of a Supervisory Board member consists of a fixed MISCELLANEOUS cash amount paid after the end of each business year for services rendered over that period. In 2017, as in 2016, each regular Superviso- INTERNAL AND EXTERNAL BOARD APPOINTMENTS ry Board member received a fixed compensation amounting to When a member of the Board of Management simultaneously holds € 100 thou per year. Each Vice Chairperson received € 150 thou, the an appointment at another company within the Allianz Group, the full Chairperson received € 200 thou. amount of the respective remuneration is transferred to Allianz SE. In recognition of related benefits to the organization, Board of Man- COMMITTEE-RELATED REMUNERATION agement members are also allowed to accept a limited number of The Chairperson and members of the Supervisory Board committees non-executive supervisory roles in appropriate external organiza- receive additional committee-related remuneration. The committee- tions. In these cases, 50 % of the remuneration received is paid to related remuneration is as follows: Allianz SE. Only if the Allianz SE Supervisory Board classifies the appointment as a personal one will the respective Board member Committee-related remuneration € thou retain the full remuneration for that position. Any remuneration paid by external organizations will be itemized in those organizations’ Committee Chair Member annual reports; its level is determined by the governing body of the Personnel Committee, Standing Committee, Risk Committee, Technology Committee 40 20 relevant organization. Audit Committee 80 40

OUTLOOK FOR 2018 The remuneration of the two new regular members of the Board of Management, Niran Peiris and Giulio Terzariol, have been set at the ATTENDANCE FEES AND EXPENSES same level as for the other regular members of the Board of Man- In addition to the fixed and committee-related remuneration, mem- agement. bers of the Supervisory Board receive an attendance fee of € 750 for Based on the yearly adequacy test, the Allianz SE Supervisory each Supervisory Board or committee meeting they attend. Should Board agreed to an increase of the base salary of Oliver Bäte, in line several meetings be held on the same or consecutive days, the at- with the well-established approach at Allianz, from € 1,125 thou to tendance fee will only be paid once. In addition, Allianz SE reimburs- € 1,312.5 thou – i.e., from 1.5 times to 1.75 times of a regular Board es the Supervisory Board members for their out-of-pocket expenses member. The target values of his variable components increase and the VAT payable on their Supervisory Board service. The Compa- accordingly, resulting in a total target compensation of € 5,250 thou. ny provides insurance coverage and technical support to the Supervi- sory Board members to an extent reasonable for carrying out the Supervisory Board duties. Remuneration of the Supervisory Board REMUNERATION FOR 2017 The remuneration of the Supervisory Board is governed by the Stat- The total remuneration for all Supervisory Board members, including utes of Allianz SE and the German Stock Corporation Act. The struc- attendance fees, amounted to € 2,179 thou (2016: € 2,025 thou). The ture of the Supervisory Board’s remuneration is regularly reviewed following table shows the individual remuneration for 2017 and 2016: with regard to its compliance with German, European, and interna- tional corporate governance recommendations and regulations.

46 Annual Report 2017 – Allianz SE B _ Management Report of Allianz SE

Individual remuneration: 2017 and 2016 € thou (total might not sum up due to rounding)

Committees1 Fixed Committee Atten- Total Members of the remune- remune- dance remune- Supervisory Board A N P R S T ration ration fees ration Michael Diekmann2 M C C C C M 2017 133.3 120.0 3.7 257.0 (Chairman) 2016 - - - - Dr. Helmut Perlet3 M C C C C 2017 83.3 66.6 2.3 152.2 (Chairman) M C C C C 2016 200.0 160.0 6.7 366.7 Dr. Wulf H. Bernotat4 C M 2017 62.5 41.7 2.2 106.4 (Vice Chairman) C M 2016 150.0 100.0 4.5 254.5 Jim Hagemann Snabe M5 M M6 C 2017 133.3 56.7 4.5 194.5 (Vice Chairman) M M 2016 100.0 40.0 5.2 145.2 Rolf Zimmermann M M7 M 2017 150.0 41.7 4.5 196.2 (Vice Chairman) M M 2016 150.0 40.0 4.5 194.5 Dante Barban8 M 2017 41.7 8.3 3.0 53.0 M 2016 100.0 20.0 4.5 124.5 Sophie Boissard9 M 2017 66.7 26.7 3.7 97.1 2016 - - - - Christine Bosse M10 M11 2017 100.0 28.3 4.5 132.8 M M 2016 100.0 40.0 4.5 144.5 Gabriele Burkhardt-Berg M M 2017 100.0 33.3 3.8 137.1 M 2016 100.0 20.0 4.5 124.5 Jean Jacques Cette M 2017 100.0 40.0 5.3 145.3 M 2016 100.0 40.0 6.0 146.0 Dr. Friedrich Eichiner12 C13 M M 2017 100.0 86.7 6.0 192.7 M 2016 66.6 13.3 2.2 82.1 Martina Grundler14 M 2017 100.0 40.0 5.3 145.3 M 2016 75.0 26.6 4.5 106.1 Herbert Hainer15 M M 2017 66.7 26.7 3.0 96.4 2016 - - - - Godfrey Robert Hayward16 M 2017 66.7 13.3 3.0 83.0 2016 - - - - 17 Prof. Dr. Renate Köcher M M 2017 41.7 8.3 2.2 52.2 M M 2016 100.0 20.0 3.7 123.7 Jürgen Lawrenz M M18 2017 100.0 33.3 4.5 137.8 M 2016 100.0 20.0 4.5 124.5 Total19 2017 1,445.9 671.7 61.5 2,179.0 2016 1,408.2 558.2 58.5 2,025.2

Legend: C = Chairperson of the respective committee, M = Member of the respective committee 10_Since 3 May 2017 1_Abbreviations: A - Audit, N - Nomination, P - Personnel, R - Risk, S - Standing, T - Technology 11_Until 3 May 2017 2_Since 7 May 2017 12_Since 4 May 2016 3_Until 6 May 2017 13_Since 3 May 2017 4_Until 3 May 2017 14_Since 1 April 2016 5_Until 3 May 2017 15_Since 3 May 2017 6_Since 3 May 2017 16_Since 3 May 2017 7_Until 3 May 2017 17_Until 3 May 2017 8_Until 3 May 2017 18_Since 3 May 2017 9_Since 3 May 2017 19_The total reflects the remuneration of the full Supervisory Board in the respective year.

REMUNERATION FOR MANDATES IN OTHER ALLIANZ LOANS TO MEMBERS OF THE SUPERVISORY BOARD COMPANIES AND FOR OTHER FUNCTIONS As of 31 December 2017, there was one outstanding loan granted to As remuneration for her membership in the Supervisory Board of a member of the Allianz SE Supervisory Board by an Allianz Group Allianz Deutschland AG, Ms. Gabriele Burkhardt-Berg received company: It is an € 80 thou mortgage loan from Allianz Bank, grant- € 61.8 thou for the financial year 2017. Mr. Jürgen Lawrenz did not ed at the normal market interest rate in 2010, with an overall dura- receive any remuneration for his service on the Supervisory Board of tion of ten years. Allianz Technology SE. All current employee representatives of the Supervisory Board except for Ms. Martina Grundler are employed by Allianz Group companies and receive a market-based remuneration for their services.

Annual Report 2017 – Allianz SE 47 B _ Management Report of Allianz SE

OTHER INFORMATION

Our steering gagement Survey and Net Promoter Score (NPS3) results, diversity development, and the share of digital retail products/digital client BOARD OF MANAGEMENT communication. AND ORGANIZATIONAL STRUCTURE Allianz SE has a divisional Board structure based on functional and business responsibilities. Business-related divisions reflect our busi- Our Corporate Responsibility approach ness segments Property-Casualty, Life/Health, Asset Management, and Corporate and Other. In 2017 they were overseen by five Board Allianz seeks to position itself as the world’s most trusted financial members. The remaining four divisions (i.e. Chairman of the Board of services provider and a global sustainability leader. As such, we strive Management, Finance, Investments, and Operations 1 ) focus on to create sustainable economic value through a long-term approach Group functions, along with business-related responsibilities. to corporate governance, social responsibility, and environmental For further information on Board of Management members and stewardship. their responsibilities, please refer to Mandates of the Members of the In 2017, we took the leading position among all rated insurance Board of Management on page 8. companies in the Dow Jones Sustainability Index (DJSI) ranking, scoring 87 out of 100 points. The DJSI ranks companies according to TARGET SETTING AND MONITORING environmental, social, and governance (ESG) criteria, assessing their The Allianz Group steers its operating entities and business segments strategy and performance. via an integrated management and control process. It begins with the definition of a business-specific strategy and goals, which are CORPORATE RESPONSIBILITY GOVERNANCE discussed and agreed upon between the Holding and operating Strong corporate governance is pivotal to our sustainability approach entities. Based on this strategy, our operating entities prepare three- and features among our most important material issues. year plans which are then aggregated to form the financial plans for Established in 2012, the Group ESG Board is the highest govern- the business divisions and for the Allianz Group as a whole. This plan ing body for sustainability-related issues. It consists of three Allianz SE also forms the basis for our capital management. The Supervisory Board members and several department heads. They meet quarterly Board approves the plan and sets corresponding targets for the and are responsible for ensuring ESG integration across all business Board of Management. The performance-based remuneration of the lines as well as all core processes dealing with insurance and invest- Board of Management is linked to short-term, mid-term, and long- ment decisions. Key topics of focus in 2017 included implementation term targets to ensure effectiveness and emphasize sustainability. For of the recommendations of the Taskforce of Climate-related Financial further details about our remuneration structure, including target Disclosures and development of a more systematic approach to setting and performance assessment, please refer to the Remunera- investor engagement. tion Report starting on page 37. The Group ESG Board is in charge of corporate responsibility and We continuously monitor our business performance against climate-related topics, and leads on associated stakeholder en- these targets through monthly reviews – which cover key operational gagement. Functional departments provide regular updates on and financial metrics – to ensure we can move quickly and take ap- sustainability issues directly to the Group ESG Board. propriate measures in the event of negative developments. The Allianz Group uses operating profit and net income as key financial CORPORATE RESPONSIBILITY APPROACH performance indicators across all its business segments. Other indica- We want our stakeholders to know that Allianz is a financially solid tors include segment-specific figures, such as the combined ratio for and trustworthy company that embraces sustainable business as Property-Casualty, return on equity2 for Life/Health, and the cost- good business. To achieve this, we also need to understand our income ratio for Asset Management. To steer and control new busi- stakeholders’ needs and concerns, which is why we engage with a ness in our business segments Property-Casualty and Life/Health, we broad range of social and political players and organizations. The use Return on Risk Capital (RoRC). We also use new business margins insight they provide enables us to focus our Corporate Responsibility for Life/Health. strategy, activities, and reporting on the right areas. Besides performance steering, we also have a risk steering pro- cess in place, which is described in the Risk and Opportunity Report We organize our Corporate Responsibility strategy around three focus starting on page 19. areas in which we address the relevant material issues our stakehold- Non-financial key performance indicators (KPIs) are mainly used ers perceive as vital for business success and sustainability: for the sustainability assessment that we conduct when determining mid-term bonus levels. In line with our Renewal Agenda, KPIs mainly Low-carbon economy: supporting renewable energy and decarbon- represent three key levers: True Customer Centricity, Digital by De- ization through our investments; providing sustainable insurance fault, and Inclusive Meritocracy. Examples include the Allianz En- solutions; reducing our environmental footprint.

1_This member of the Board of Management also oversees Allianz Partners. 3_NPS is a measurement of customers’ willingness to recommend Allianz. Top-down NPS is measured regularly according 2_Excluding unrealized gains/losses on bonds net of shadow accounting. to global cross-industry standards and allows benchmarking against competitors in the respective markets.

48 Annual Report 2017 – Allianz SE B _ Management Report of Allianz SE

Social inclusion: supporting the social inclusion of children and period is observed. Nevertheless, employees may instruct the trustee youth through our Future Generations program; developing solutions to exercise voting rights, or have power of attorney granted to them for customers in emerging markets; promoting diversity and wellbe- to exercise such voting rights. Lock-up periods serve the Employee ing among our employees. Stock Purchase Plan’s aims of tying employees to the company and letting them benefit from the performance of the share price. Business integration: integrating environmental, social, and govern- ance (ESG) issues across our investment and insurance businesses; INTERESTS IN THE SHARE CAPITAL building trust through transparency, responsible sales, and data EXCEEDING 10 % OF THE VOTING RIGHTS privacy. We are not aware of any direct or indirect interests in the share capi-

tal of Allianz SE that exceed 10 % of the voting rights. For reporting purposes, we organize our approach around Allianz’s five key roles as a sustainable insurer, responsible investor, trusted SHARES WITH SPECIAL RIGHTS company, attractive employer, and committed corporate citizen. CONFERRING POWERS OF CONTROL Allianz SE and Allianz Group comply with the legal requirements to There are no shares with special rights conferring powers of control. provide a non-financial statement and a non-financial Group state- ment according to §§ 289b (1), 315b (1) of the HGB by issuing a com- LEGAL AND STATUTORY PROVISIONS APPLICABLE bined separate non-financial report for Allianz Group and Allianz SE TO THE APPOINTMENT AND REMOVAL OF MEMBERS according to §§ 289b (3), 315b (3), sentence 1, sentence 2 in conjunction OF THE BOARD OF MANAGEMENT AND TO with § 298 (2) of the HGB. This report can be found on our website at: AMENDMENTS OF THE STATUTES www.allianz.com/nf-report. The Supervisory Board appoints the members of Allianz SE’s Board of

Please also refer to our 2017 Group Sustainability Report (to Management for a maximum term of five years (Articles 9 (1), 39 (2) be published in April 2018) for full details of our corporate respon- and 46 of the SE Regulation, §§ 84, 85 AktG and § 5 (3) of the Stat- sibility strategy, approach, and performance: www.allianz.com/ utes). Reappointments, for a maximum of five years each, are permit- sustainability. ted. A simple majority of the votes cast in the Supervisory Board is required to appoint members of the Board of Management. In the case of a tie vote, the Chairperson of the Supervisory Board, who Branches pursuant to Article 42 of the SE Regulation must be a shareholder

representative, shall have the casting vote (§ 8 (3) of the Statutes). If In 2017, Allianz SE operated its business from Munich and from the Chairperson does not participate in the vote the Vice Chairperson branch offices in Singapore, Labuan (Malaysia), Wallisellen (Suisse) shall have the casting vote, provided he or she is a shareholder repre- and Dublin (Ireland). sentative. A Vice Chairperson who is an employee representative has

no casting vote (§ 8 (3) of the Statutes). If one of the required mem- bers of the Board of Management is missing, the courts must appoint Takeover-related Statements and Explanations such member in urgent cases upon the application of an interested

party (§ 85 AktG). The Supervisory Board may dismiss members of the

The following information is provided pursuant to § 289a (1) of the Board of Management if there is an important reason (§ 84 (3) AktG).

German Commercial Code (“Handelsgesetzbuch – HGB”) and According to § 5 (1) of the Statutes, the Board of Management

§ 176 (1) of the German Stock Company Act (“Aktiengesetz – AktG”). shall consist of at least two persons. The Supervisory Board deter- mines the number of any additional members. The Supervisory Board COMPOSITION OF SHARE CAPITAL has appointed a Chairman of the Board of Management pursuant to

As of 31 December 2017, the share capital of Allianz SE was § 84 (2) AktG. € 1,169,920,000. It was divided into 440,249,646 registered and fully German insurance supervisory law requires that members of the paid-up shares with no-par value. All shares carry the same rights and Board of Management have the reliability and professional compe- obligations. Each no-par value share carries one vote. tence needed to manage an insurance company. A person cannot become a member of the Board of Management if he or she is al- RESTRICTIONS ON VOTING RIGHTS AND SHARE ready a manager of two other insurance undertakings, pension funds, TRANSFERS; EXERCISE OF VOTING RIGHTS IN CASE insurance holding companies, or insurance special-purpose vehicles. OF EMPLOYEE EQUITY PARTICIPATIONS However, the supervisory authority may permit more than two such

Shares may only be transferred with the consent of the company. An mandates if they are held within the same group (§ 24 (3) of the Ger- approval duly applied for may only be withheld if it is deemed neces- man Insurance Supervision Act (“Versicherungsaufsichtsgesetz – sary in the company’s interest on exceptional grounds. The applicant VAG”)). The Federal Financial Services Supervisory Authority (“Bun- will be informed of the reasons. desanstalt für Finanzdienstleistungsaufsicht – BaFin”) must be noti- Shares acquired by employees of the Allianz Group as part of fied about the intention of appointing a Board of Management the Employee Stock Purchase Plan are, in principle, subject to a one- member pursuant to § 47 No. 1 VAG. year lock-up period. Outside Germany, the lock-up period may be up Amendments to the Statutes must be adopted by the General to five years in some cases. In some countries, the employee shares Meeting. § 13 (4) of the Statutes of Allianz SE stipulates that, unless are held by a bank, another natural person, or a legal entity acting as this conflicts with mandatory law, changes to the Statutes require a a trustee throughout that period in order to ensure that the lock-up two-thirds majority of the votes cast, or, if at least one half of the

Annual Report 2017 – Allianz SE 49 B _ Management Report of Allianz SE

share capital is represented, a simple majority of the votes cast. The until 6 May 2019. The total number of shares acquired thereunder,

Statutes thereby make use of the option set out in § 51 of the SE together with treasury shares held by Allianz SE or attributable to it

Implementation Act (“SE-Ausführungsgesetz – SEAG”), which is based under §§ 71a et seq. AktG, shall at no time exceed 10 % of the share upon Article 59 (1) and (2) of the SE Regulation. A larger majority is capital of Allianz SE. required, inter alia, for a change in the corporate object or the reloca- tion of the registered office to another E.U. member state (§ 51 SEAG). ESSENTIAL AGREEMENTS OF ALLIANZ SE WITH The Supervisory Board may alter the wording of the Statutes CHANGE-OF-CONTROL CLAUSES AND

(§ 179 (1) AktG and § 10 of the Statutes). COMPENSATION AGREEMENTS PROVIDING FOR TAKEOVER SCENARIOS AUTHORIZATION OF THE BOARD OF MANAGEMENT The following essential agreements of the company are subject to a TO ISSUE AND REPURCHASE SHARES change-of-control condition following a takeover bid: The Board of Management is authorized to issue shares as well as to acquire and use treasury shares as follows: − Our reinsurance contracts, in principle, include a clause under It may increase the company’s share capital, on or before which both parties to the contract have an extraordinary termina- 6 May 2019, with the approval of the Supervisory Board, by issuing tion right, if and when the counterparty merges or its ownership new registered no-par value shares against contributions in cash or control situation changes materially. Agreements with brokers and/or in kind, on one or more occasions: regarding services connected with the purchase of reinsurance cover also provide for termination rights in case of a change of − Up to a total of € 550,000,000 (Authorized Capital 2014/I). In case control. Such clauses are standard market practice. of a capital increase against cash contribution, the Board of − Allianz SE is also party to various bancassurance distribution Management may exclude the shareholders’ subscription rights agreements for insurance products in various regions. These dis- for these shares with the consent of the Supervisory Board, (i) for tribution agreements normally include a clause under which the fractional amounts, (ii) in order to safeguard the rights pertaining parties have an extraordinary termination right in the event of a to holders of convertible bonds or bonds with warrants, including change of control of the other party’s ultimate holding company. mandatory convertible bonds, and (iii) in the event of a capital in- − Shareholder agreements and joint ventures to which Allianz SE is

crease of up to 10 %, if the issue price of the new shares is not sig- a party often contain change-of-control clauses that provide, as nificantly below the stock market price. The Board of Manage- the case may be, for the termination of the agreement, or for put ment may furthermore exclude the shareholders’ subscription or call rights that one party can exercise with regard to the joint rights with the consent of the Supervisory Board, in the event of a venture or the target company, if there is a change of control of capital increase against contributions in kind. the other party. − Up to a total of € 13,720,000 (Authorized Capital 2014/II). The − The framework agreements between Allianz SE and the subsidi- shareholders’ subscription rights can be excluded in order to issue aries of various car manufacturers relating to the distribution of the new shares to employees of Allianz SE and its Group compa- car insurance by the respective car manufacturers each include a nies, as well as for fractional amounts. clause under which each party has an extraordinary termination right in case there is a change of control of the other party. The company’s share capital is conditionally increased by up to − Bilateral credit agreements in some cases provide for termination € 250,000,000 (Conditional Capital 2010/2014). This conditional rights if there is a change of control, mostly defined as the acquisi- capital increase will only be carried out to the extent that conversion tion of at least 30 % of the voting rights within the meaning of or option rights are exercised (or conversion obligations fulfilled) § 29 (2) of the German Takeover Act (“Wertpapiererwerbs- und resulting from bonds issued by Allianz SE or its subsidiaries, based on Übernahmegesetz – WpÜG”). If such termination rights are exer- the authorizations granted by the General Meeting on 5 May 2010 cised, the respective credit lines have to be replaced by new credit and 7 May 2014. lines under conditions then applicable. The Board of Management may buy back and use Allianz shares for other purposes until 6 May 2019 as per authorization of the Gen- The company has entered into the following compensation agree- eral Meeting of 7 May 2014 (§ 71 (1) No. 8 AktG). Together with other ments with members of the Board of Management and certain em- treasury shares that are held by Allianz SE, or which are attributable ployees providing for the event of a takeover bid: to it under §§ 71a et seq. AktG, such shares may not exceed 10 % of A change-of-control clause in the service contracts of the mem- the share capital at any time. The shares acquired pursuant to this bers of Allianz SE’s Board of Management provides that, if within authorization may be used, under exclusion of the shareholders’ twelve months after the acquisition of more than 50 % of the company’s subscription rights, for any legally admissible purposes, in particular share capital by one shareholder or several shareholders acting in those specified in the authorization. Furthermore, the acquisition of concert (change of control) the appointment as a member of the Board treasury shares under this authorization may also be carried out using of Management is revoked unilaterally by the Supervisory Board, or if derivatives such as put options, call options, forward purchases, or a the mandate is ended by mutual agreement, or if the Management combination thereof, provided such derivatives do not relate to more Board member resigns because his or her responsibilities as a Board than 5 % of the share capital. member are significantly reduced through no fault of the Board Domestic or foreign banks that are majority-owned by Allianz SE member, he or she shall receive his or her contractual remuneration may buy and sell Allianz shares for trading purposes (§ 71 (1) No. 7 for the remaining term of the service contract, but limited, for the and (2) AktG) under an authorization of the General Meeting valid purpose hereof, to three years, in the form of a one-off payment. The

50 Annual Report 2017 – Allianz SE B _ Management Report of Allianz SE

one-off payment is based on the fixed remuneration plus 50 % of the ACCOUNTING PROCESSES variable remuneration, with this basis being limited, however, to the The accounting processes we use to produce financial statements are amount paid for the last fiscal year. To the extent that the remaining based on a group-wide IT solution and local general ledger. Access term of the service contract is less than three years, the one-off pay- rights to accounting systems are managed according to strict author- ment is generally increased in line with a term of three years. This ization procedures. applies accordingly if, within two years of a change of control, a Internal controls are embedded in the accounting processes to mandate in the Board of Management comes to an end and is not safeguard the accuracy, completeness, and consistency of the infor- extended; the one-off payment will then be granted for the period mation provided in our financial statements. between the end of the mandate and the end of the three-year peri- od following the change of control. For further details, please refer to INTERNAL CONTROL SYSTEM APPROACH the Remuneration Report starting on page 37. Our approach can be summarized as follows: Under the Allianz Sustained Performance Plan (ASPP), Restrict- ed Stock Units (RSU) – i.e. virtual Allianz shares – are granted as a − We use a top-down, risk-based approach to determine the ac- stock-based remuneration component to senior management of the counts that have to be in the scope of our internal control system Allianz Group worldwide. The conditions for these RSU contain over financial reporting. The methodology is described in the change-of-control clauses, which apply when a majority of the voting ICOFR manual which is applicable group-wide and the IRCS share capital in Allianz SE is acquired, directly or indirectly, by one or Guideline. During the scoping process, both materiality and sus- more third parties who do not belong to the Allianz Group and which ceptibility to a misstatement are considered simultaneously. In provide for an exception from the usual vesting and exercise periods. addition to the quantitative calculation, we also consider qualita- In line with the relevant general conditions, the company will release tive criteria. the RSU to plan participants on the day of the change of control, − Next, we identify risks that could lead to material financial mis- without observing any vesting period that would otherwise apply. The statements including all relevant root causes (i.e. human pro- cash amount payable per RSU must equal the average market value cessing errors, fraud, system shortcomings, external factors, etc.). of the Allianz share and be equal to or above the price offered per − Preventive and detective key controls to address financial report- Allianz share in a preceding tender offer. By providing for the non- ing risks have been put in place to reduce the likelihood and im- application of the vesting period in the event of a change of control, pact of financial misstatements. If a potential risk materializes, the terms take into account the fact that the conditions influencing actions are taken to reduce the impact of the financial misstate- the share price are very different when there is a change of control. ment. Given the strong dependence of financial reporting pro- cesses on information technology systems, we also implement IT controls. Controls over Financial Reporting − Finally, we ensure that controls are appropriately designed and effectively executed to mitigate risk. We have set consistent doc-

The following information is given pursuant to § 289 (4) of the HGB. umentation requirements across the Allianz Group for elements In line with both our prudent approach to risk governance and such as processes, related key controls, and execution. We con- compliance with regulatory requirements, we have created a struc- duct an annual assessment of our control system to maintain and ture to identify and mitigate the risk of material errors in our financial continuously enhance its effectiveness. Audit ensures that the statements (this also includes market value balance sheet and risk overall quality of our control system is subjected to regular control- capital controls). Our internal control system over financial reporting testing, to assure reasonable design and operating effectiveness. (ICOFR) is regularly reviewed and updated. ICOFR is split into an Entity-Level Control Assessment Process (ELCA), IT General Controls (ITGC) and controls at process levels. The ELCA framework contains controls to monitor the system of governance effectiveness. In the ITGC framework we have implemented, for example, controls for access rights management and for project and change manage- ment. The ICOFR framework is part of the Integrated Risk and Con- trol System (IRCS) of Allianz SE. The IRCS is split into the main com- ponents of Reporting- (ICOFR), Compliance-, and Operations-Risks.

Annual Report 2017 – Allianz SE 51 B _ Management Report of Allianz SE

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52 Annual Report 2017 – Allianz SE

FINANCIAL STATEMENTS OF ALLIANZ SE C

Annual Report 2017 – Allianz SE 53 Repor t C _ Financial Statements of Allianz SE

FINANCIAL STATEMENTS BALANCE SHEET

€ thou as of 31 December Note 2017 2017 2016

ASSETS A. Intangible assets 1, 2 I. Self-created industrial property rights and similar rights and assets 29,187 17,623 II. Licenses acquired against payment, industrial property rights, and similar rights and assets as well as licenses for such rights and assets 1,146 2,928 30,333 20,551 B. Investments 1, 3 - 6 I. Real estate, real estate rights, and buildings, including buildings on land not owned by Allianz SE 245,401 250,343 II. Investments in affiliated enterprises and participations 74,176,435 71,354,121 III. Other investments 33,329,072 33,446,657 IV. Funds held by others under reinsurance business assumed 8,310,276 8,028,086 116,061,184 113,079,207 C. Receivables I. Accounts receivable on reinsurance business 528,244 450,606 thereof from affiliated enterprises: € 280,343 thou (2016: € 217,820 thou) thereof from participations¹: € 1,197 thou (2016: € 1,756 thou) II. Other receivables 7 4,869,995 5,022,127 thereof from affiliated enterprises: € 4,430,597 thou (2016: € 4,325,105 thou) thereof from participations¹: € 541 thou (2016: € 2,807 thou) 5,398,239 5,472,733 D. Other assets I. Tangible fixed assets and inventories 15,150 15,632 II. Cash with banks, checks, and cash on hand 234,138 49,528 III. Miscellaneous assets 8 22,835 227,014 272,123 292,174 E. Deferred charges and prepaid expenses 9 I. Accrued interests and rent 237,273 474,724 II. Other deferred charges and prepaid expenses 70,072 140,532 307,345 615,256 F. Excess of plan assets over pension and similar obligations 10 10,811 - Total Assets 122,080,035 119,479,921

1_Companies in which we hold a participating interest.

54 Annual Report 2017 – Allianz SE

C _ Financial Statements of Allianz SE

€ thou as of 31 December Note 2017 2017 2017 2016

EQUITY AND LIABILITIES A. Shareholders’ equity 12 I. Issued capital 1,169,920 1,169,920 Less: mathematical value of own shares 3,638 4,945 1,166,282 1,164,975 II. Additional paid-in capital 27,905,256 27,844,664 III. Revenue reserves 1. Statutory reserves 1,229 1,229 2. Other revenue reserves 8,823,789 11,782,928 8,825,017 11,784,157 IV. Net earnings 4,117,339 3,855,866 42,013,894 44,649,662 B. Subordinated liabilities 13, 16 13,689,227 13,806,280 C. Insurance reserves 14 I. Unearned premiums 1. Gross 1,641,405 1,642,350 2. Less: amounts ceded 65,197 81,950 1,576,208 1,560,400 II. Aggregate policy reserves 1. Gross 709,801 814,245 2. Less: amounts ceded 27,661 26,734 682,140 787,511 III. Reserves for loss and loss adjustment expenses 1. Gross 12,092,668 11,683,973 2. Less: amounts ceded 1,964,574 1,942,252 10,128,094 9,741,721 IV. Reserves for premium refunds 1. Gross 22,551 33,968 2. Less: amounts ceded 31 21 22,520 33,947 V. Claims equalization and similar reserves 2,541,167 2,315,370 VI. Other insurance reserves 1. Gross 30,154 32,260 30,154 32,260 14,980,283 14,471,209 D. Other provisions 15 7,949,981 7,369,141 E. Funds held with reinsurance business ceded 983,272 1,075,022 F. Other liabilities I. Accounts payable on reinsurance business 362,729 410,563 thereof to affiliated enterprises: € 214,528 thou (2016: € 269,609 thou) thereof to participations¹: € 325 thou (2016: € 11,968 thou) II. Bonds 16 2,353,545 2,575,931 thereof to affiliated enterprises: € 2,353,545 thou (2016: € 2,575,931 thou) III. Liabilities to banks 16 490 397,574 IV. Miscellaneous liabilities 16 39,735,524 34,717,195 including taxes of: € 21,445 thou (2016: € 21,626 thou) thereof to affiliated enterprises: € 38,397,220 thou (2016: € 33,429,044 thou) thereof to participations¹: € 266 thou (2016: € 3 thou) 42,452,289 38,101,263 G. Deferred income 11,091 7,344 Total equity and liabilities 122,080,035 119,479,921

1_Companies in which we hold a participating interst.

Annual Report 2017 – Allianz SE 55

C _ Financial Statements of Allianz SE

INCOME STATEMENT

€ thou

Notes 2017 2017 2017 2016 I. Technical account 1. Premiums earned (net) a) Gross premiums written 18 10,265,435 10,820,290 b) Ceded premiums written (777,449) (787,517) 9,487,986 10,032,773 c) Change in gross unearned premiums (50,839) (425,198) d) Change in ceded unearned premiums (3,712) 17,098 (54,550) (408,100) Premium earned (net) 9,433,436 9,624,673 2. Allocated interest return (net) 19 20,849 21,025 3. Other underwriting income (net) 19,249 72,789 4. Loss and loss adjustment expenses (net) 20 a) Claims paid aa) Gross (6,076,163) (4,504,389) ab) Amounts ceded in reinsurance 421,733 (571,225) (5,654,430) (5,075,614) b) Change in reserve for loss and loss adjustment expenses (net) ba) Gross (776,415) (2,164,929) bb) Amounts ceded in reinsurance 169,179 896,657 (607,236) (1,268,272) Loss and loss adjustment expenses (net) (6,261,666) (6,343,886) 5. Change in other insurance reserves (net) 21 20,093 6,725 6. Expenses for premium refunds (net) 11,123 (13,244) 7. Underwriting expenses (net) 22 (2,884,228) (2,946,248) 8. Other underwriting expenses (net) (19,771) (21,864) 9. Subtotal (Net underwriting result) 339,084 399,970 10. Change in claims equalization and similar reserves (225,797) (527,557) 11. Net technical result 113,287 (127,587) II. Non-technical account 1. Investment income 23 5,647,514 5,084,886 2. Investment expenses 24 (1,934,808) (1,795,458) 3. Investment result 3,712,706 3,289,428 4. Allocated interest return (21,819) (22,131) 3,690,886 3,267,297 5. Other income 3,158,500 2,718,536 6. Other expenses (3,425,921) (3,177,927) 7. Other non-technical result 25 (267,421) (459,391) 8. Non-technical result 3,423,465 2,807,906 9. Net operating income 3,536,752 2,680,319 10. Income Taxes 26 (392,665) (256,718) Amounts charged to other Group companies 514,930 522,931 122,265 266,213 11. Other taxes 12,401 1,082 12. Taxes 134,666 267,295 13. Net income 3,671,418 2,947,614 14. Unappropriated earnings carried forward 445,920 908,252 15. Net earnings 27 4,117,339 3,855,866

56 Annual Report 2017 – Allianz SE

C _ Financial Statements of Allianz SE

NOTES TO THE FINANCIAL STATEMENTS

INVESTMENTS IN AFFILIATED ENTERPRISES AND NATURE OF OPERATIONS AND PARTICIPATIONS

SHARES IN AFFILIATED ENTERPRISES AND BASIS OF PREPARATION PARTICIPATIONS These are recorded at cost less impairments, in accordance with

NATURE OF OPERATIONS § 341b (1) of the German Commercial Code in conjunction with

Allianz SE, the holding and reinsurance company of the Allianz Group, § 253 (3) sentence 5 of the German Commercial Code. is located at Königinstraße 28, 80802 Munich, and registered in the Impairments are measured either as the difference between ac- Commercial Register of the municipal court in Munich under quisition cost and the respective value, in accordance with IDW RS HRB 164232. HFA 10 in conjunction with IDW S1, or as the difference between acquisition cost and the lower share price as of 31 December 2017. BASIS OF PREPARATION Wherever the market value at the balance sheet date was high- Our Financial Statements and the Management Report have been er than the previous year’s valuation, the value is written up to no prepared in accordance with the regulations of the German Commer- more than the historical acquisition cost. cial Code (HGB), the German Stock Corporation Act (AktG), the Law on the Supervision of Insurance Enterprises (VAG), and the Govern- LOANS IN AFFILIATED ENTERPRISES AND ment Order on the External Accounting Requirements of Insurance PARTICIPATIONS Enterprises (RechVersV). These items are normally recorded at cost less impairments in ac-

All amounts in these financial statements are presented in thou- cordance with § 253 (3) sentence 5 of the German Commercial Code. sands of Euros (€ thou), unless otherwise stated. However, when converting foreign-currency loans into Euros at the reporting date the strict lower of cost or market value principle is ACCOUNTING, VALUATION, AND applied. OTHER INVESTMENTS

CALCULATION METHODS STOCKS, INTERESTS IN FUNDS, DEBT SECURITIES AND OTHER FIXED AND VARIABLE INCOME SECURITIES, INTANGIBLE ASSETS MISCELLANEOUS INVESTMENTS

Intangible assets are recorded at acquisition or construction cost less These items are generally valued in accordance with § 341b (2) of the depreciation. Internally generated intangible assets are capitalized German Commercial Code in conjunction with § 253 (1), (4), and (5) of and depreciated on a straight-line basis. In case of a permanent the German Commercial Code, using either the acquisition cost or the impairment, an unscheduled write-down is recognized. stock exchange or market value on the balance sheet date, which- ever is lower. We calculate the acquisition cost by averaging the REAL ESTATE, REAL ESTATE RIGHTS, AND BUILDINGS, different acquisition costs for securities of the same type. Long-term INCLUDING BUILDINGS ON LAND NOT OWNED BY investments in mutual funds are valued according to the regulations

ALLIANZ SE that apply to investments pursuant to § 341b (2) of the German

These items are recorded at acquisition or construction cost less Commercial Code in conjunction with § 253 (1) and (3) of the code depreciation. Depreciation is measured according to ordinary useful using the moderate lower of cost or market value principle. life. In case of a permanent impairment, the values of these items are adjusted through unscheduled write-downs. REGISTERED BONDS, DEBENTURES AND LOANS These items are recorded at cost less impairments in accordance with

§ 253 (3) sentence 5 of the German Commercial Code. In accordance

with § 341c of the code, amortized cost accounting is applied and the difference between acquisition cost and the redemption amount is amortized over the remaining period, based on the effective interest method.

SECURITIES TO MEET LIABILITIES RESULTING FROM RETIREMENT PROVISION COMMITMENTS

These securities are valued at fair value in accordance with § 253 (1) of the German Commercial Code, and offset against the liabilities in

accordance with § 246 (2) of the code. Pension plan reinsurance contracts are recorded at asset value.

Annual Report 2017 – Allianz SE 57

C _ Financial Statements of Allianz SE

TANGIBLE FIXED ASSETS, INVENTORIES, AND For Property-Casualty reinsurance, the equalization reserve, the MISCELLANEOUS ASSETS reserve for nuclear plants, the product liability reserve for major These items are recorded at acquisition cost less depreciation. Low- pharmaceutical risks, and reserves for risks relating to terrorist attacks value assets worth up to € 150 are written off immediately. A com- are calculated according to § 341h of the German Commercial Code pound item for tax purposes formed in accordance with § 6 (2a) of the in conjunction with § 29 and § 30 RechVersV. The reserves are set up to German Income Tax Act (EStG) for assets from € 150 to € 1,000 is moderate substantial fluctuations in the claims of individual lines of depreciated by one fifth each year. business. In cases where above-average or below-average claims occur, changes in the reserves mitigate the technical result for the DEFERRED TAX ASSETS individual lines of business. When calculating deferred taxes, deferred tax assets and liabilities are offset. OTHER PROVISIONS

Based on the capitalization option in accordance with § 274 (1) Pension provisions are calculated applying actuarial principles. From sentence 2 of the German Commercial Code, the surplus of deferred 2016 onwards, the discount rate used for calculating the pension tax assets over deferred tax liabilities is not recognized. obligations has to be derived from a 10-year-average, while it was derived from a 7-year-average before. A positive difference resulting REMAINING ASSETS from the change of the valuation method is earmarked for profit

These consist of the following: distribution (§ 253 (6) sentence 2 of the German Commercial Code). The aforementioned change only applies to pension obligations, not − funds held by others under reinsurance business assumed, to other provisions such as phased-in early retirement benefits, long- − bank deposits, term credit accounts, or jubilee payments. − accounts receivables on reinsurance business, Apart from that, with respect to the discount rate, the simplifica-

− other receivables, tion option set out in § 253 (2) sentence 2 of the German Commercial − cash with banks and cash on hand. Code is still being applied (duration of fifteen years). The effect result- ing from the change in the discount rate is reported under other non- These items are recorded at face value less repayments and impair- technical result. ments. Provisions for jubilee payments, birthday payments and phased- in early retirement benefits are also calculated in accordance with INSURANCE RESERVES actuarial principles. For further information regarding the accounting These consist of the following: for pensions and similar obligations, please refer to note 15 to our financial statements. − unearned premiums, Remaining other provisions are recognized at the settlement − aggregate policy reserves, amount. Long-term provisions are discounted applying the net ap- − reserves for loss and loss adjustment expenses, proach in accordance with IDW RS HFA 34. − reserves for premium refunds, − claims equalization and similar reserves, REMAINING LIABILITIES − other insurance reserves. These consist of the following:

Insurance reserves are set up according to the German Commercial − subordinated liabilities, Code and RechVersV requirements. The primary goal is to ensure our − funds held with reinsurance business ceded, ongoing ability to satisfy reinsurance contract liabilities in all cases. − other liabilities. Generally, the reinsurance reserves are booked according to the cedent’s statements. For claims incurred but not yet reported, or not These items are valued at the settlement amount. Annuities are rec- sufficiently reported, additional reserves are calculated using actuar- orded at present value. ial techniques. Insurance reserves in the ceded reinsurance business are calcu- PREPAID EXPENSES AND DEFERRED INCOME lated according to the terms of the retrocession contracts. Accrued interest and rent are valued at nominal amounts. Premiums Written premiums for future periods are accrued in unearned and discounts carried forward as prepaid income and expenses are premiums. amortized over the remaining life of the related financial instruments. Aggregate policy reserves for Life/Health reinsurance are gener- ally recorded according to the amounts in the cedent’s statements. CURRENCY TRANSLATION Reserves for loss and loss adjustment expenses are established Transactions are generally recorded in the original currency and for the payment of losses and loss adjustment expenses on claims converted into Euros at the relevant daily rate (middle forex spot that have occurred but are not yet settled. Reserves for loss and loss rate). adjustment expenses fall into two categories: case reserves for re- Loans to affiliated enterprises denominated in foreign currencies ported claims and reserves for incurred but not reported yet, or not are converted into Euros with the middle forex spot rate as of the sufficiently reported, losses. reporting date and applying the strict lower of cost or market value principle.

58 Annual Report 2017 – Allianz SE

C _ Financial Statements of Allianz SE

The valuation of foreign currency shares in affiliated enterprises All other monetary assets and liabilities recorded in foreign cur- and participations, stocks, interests in funds, and other variable and rency are valued at the middle forex spot rate as of the reporting fixed-income securities is performed by converting their value in the date. Exchange rate differences resulting from this valuation of for- original currency into Euro, using the middle forex spot rate as of the eign currency positions are reflected in the other non-technical result. reporting date. Comparing the acquisition cost in Euros with the value in Euro as VALUATION UNITS described above, the moderate lower-value principle is applied for Allianz SE made use of the option of forming valuation units as de- affiliated enterprises and participations. For other investments, the fined in § 254 of the German Commercial Code. This option is used for strict lower of cost or market value principle is applied. derivative contracts in which Allianz SE acts as an intra-group clear- As a result of this valuation method, currency gains and losses ing agency. In this function, Allianz SE enters into derivative transac- are not separately determined and shown as foreign-exchange tions with other Group companies and hedges the exposure resulting gains/losses in the other non-technical result. Instead, the net effect from these transactions by entering into mirror positions with the of both changes (exchange rate and value in original currency) is same term and structure but with different partners. Opposing posi- reflected in the impairments/reversals of impairments and realized tions whose performance completely offset each other have been gains/losses calculated for these asset classes and is disclosed in the combined into valuation units and form a perfect micro hedge. investment result. When accounting for valuation units, we apply the “freezing” Issued debt securities and borrowings denominated in foreign method, which means that mutually offsetting changes in value of currencies are converted into Euro at the middle forex spot rate as of opposing positions (i.e., within valuation units) are not recorded in the the reporting date. Unrealized losses are recognized immediately in income statement (see also note 17). the income statement, while unrealized gains are not.

Annual Report 2017 – Allianz SE 59

C _ Financial Statements of Allianz SE

SUPPLEMENTARY INFORMATION ON ASSETS

1 _ Change of assets A., B.I. through B.III.

Values stated as of 1 January 2017 € thou % A. Intangible assets 1. Self-created industrial property rights and similar rights and assets 17,623 2. Licenses acquired against payment, industrial property rights, and similar rights and assets as well as licenses for such rights and assets 2,928 Subtotal A. 20,551 B.I. Real estate, real estate rights, and buildings, including buildings on land not owned by Allianz SE 250,343 0.2 B.II. Investments in affiliated enterprises and participations 1. Shares in affiliated enterprises 64,405,015 61.3 2. Loans to affiliated enterprises 6,446,846 6.1 3. Participations 501,160 0.5 4. Loans to participations 1,100 - Subtotal B.II. 71,354,121 67.9 B.III. Other investments 1. Stocks, interests in funds and other variable-income securities 1,753,794 1.7 2. Debt securities and other fixed-income securities 27,423,045 26.1 a) Registered bonds 2,606,687 2.5 b) Loans and promissory notes 279,015 0.3 3. Bank deposits 1,384,116 1.3 Subtotal B.III. 33,446,657 31.9 Subtotal B.I. – B.III. 105,051,121 100.0 Total 105,071,672

2 _ Intangible assets

The book value of intangible assets totaled € 30 mn (2016: € 21 mn) In 2017, the research and development costs of Allianz SE and mainly consists of internally generated software. amounted to € 13 mn and represent in total the development costs for the internally generated software.

3 _ Market value of investments

Fair value and carrying amount of the investments, subdivided into individual asset categories, were as follows:

Book values and market values of investments € bn

Book value Market value Valuation reserve as of 31 December 2017 2016 2017 2016 2017 2016 Real estate 0.2 0.3 0.7 0.7 0.5 0.4 Equity securities 71.6 66.7 81.3 76.1 9.7 9.4 Debt securities 28.4 27.4 28.8 28.1 0.4 0.7 Loans 6.3 9.3 6.8 10.6 0.5 1.3 Bank deposits 1.2 1.4 1.2 1.4 - - Funds held by others under reinsurance business assumed 8.3 8.0 8.3 8.0 - - Total 116.1 113.1 127.1 124.9 11.1 11.8

60 Annual Report 2017 – Allianz SE

C _ Financial Statements of Allianz SE

Additions Disposals Revaluation Depreciation Net additions (+) (+) (-) (+) (-) Net disposals (-) Values stated as of 31 December 2017 € thou € thou € thou € thou € thou € thou %

13,343 - - 1,779 11,564 29,187 265 153 - 1,894 (1,782) 1,146 13,608 153 - 3,673 9,782 30,333 9,000 9,622 860 5,180 (4,942) 245,401 0.2

10,633,346 5,030,292 - 8,818 5,594,236 69,999,251 65.0 167,430 2,954,611 - 302 (2,787,482) 3,659,363 3.4 27,712 1,526 - 13,525 12,661 513,821 0.5 2,900 - - - 2,900 4,000 - 10,831,388 7,986,429 - 22,645 2,822,315 74,176,435 68.8

709,198 1,399,742 842 130 (689,833) 1,063,961 1.0 25,233,196 24,054,321 8,749 238,712 948,911 28,371,956 26.3 1,814,677 2,053,109 - - (238,432) 2,368,255 2.2 63,350 28,162 - - 35,188 314,203 0.3 - 173,419 - - (173,419) 1,210,697 1.1 27,820,420 27,708,754 9,590 238,843 (117,586) 33,329,072 30.9 38,660,808 35,704,804 10,450 266,668 2,699,787 107,750,908 100.0 38,674,416 35,704,957 10,450 270,341 2,709,569 107,781,241

VALUATION METHODS USED TO DETERMINE THE BANK DEPOSITS AND FUNDS HELD BY OTHERS MARKET VALUE UNDER REINSURANCE BUSINESS ASSUMED There are no differences between the book value and the fair value REAL ESTATE of those items. Land and buildings are valued using the discounted cash flow meth- od or, for new buildings, at cost. The fair value was determined during the fiscal year. 4 _ Real estate, real estate rights and buildings

EQUITY SECURITIES The book value of own property for own use amounted to Investments in companies quoted on the stock exchange are general- € 135,863 thou (2016: € 0 thou). ly measured by the stock exchange price quoted on the last trading day of 2017. Non-quoted companies are valued at their net asset value calculated by the German Association for Financial Analysis 5 _ Investments in affiliated enterprises and and Asset Management’s (DVFA) method. For recent transactions the participations transaction prices were used.

€ bn DEBT SECURITIES as of 31 December 2017 2016 Change These items are measured at the stock exchange value quoted on the Shares in affiliated enterprises 70.0 64.4 5.6 last trading day of 2017 or, if there is no active market, at the prices Loans to affiliated enterprises 3.7 6.5 (2.8) obtained from brokers or pricing services. Participations 0.5 0.5 - Total 74.2 71.4 2.8 LOANS

Loans are valued using the discounted cash flow method. The rele- vant discount rates are derived from observable market parameters and reflect the remaining life and credit risk of the instruments.

Annual Report 2017 – Allianz SE 61

C _ Financial Statements of Allianz SE

The book value of shares in affiliated enterprises went up by € 5.6 bn 7 _ Other receivables to € 70.0 bn (2016: € 64.4 bn). This increase resulted from the following: Other receivables dropped by € 152 mn. This was caused by a reduc- − a € 2.8 bn capital increase of our subsidiary Allianz Europe B.V. by tion in tax receivables (€ (251) mn), partly compensated for by a rise contribution in kind of an intra-group loans receivable against of intra-group receivables (€ 103 mn). Allianz of America, Inc., − a contribution in kind of investment fund shares to our holding companies Allianz of Asia-Pacific and Africa GmbH and Atropos 8 _ Miscellaneous assets Vermögensverwaltungsgesellschaft mbh resulting in book value increases by (€ 0.6 bn) and (€ 0.4 bn), respectively, At the end of the fiscal year, this position mainly included variation − the acquisition of shares in Euler Hermes Group S.A. for a purchase margins paid in connection with financial derivative transactions price of € 0.8 bn (€ 122 per share), increasing the Allianz Group (€ 10 mn) and options on stock indices (€ 6 mn).

participation in Euler Hermes by 15.2 % to 79.1 % at year end 2017, − various further capital increases and decreases of Group compa- 9 _ Deferred charges and prepaid expenses nies amounting to € 1.1 bn and € 0.1 bn, respectively. This item includes accrued interests in the amount of € 237 mn (2016: Loans to affiliated enterprises declined by € 2.8 bn to € 3.7 bn (2016: € 475 mn), which mainly result from our investments in debt securities € 6.5 bn) due to the termination of intra-group loans provided to our and loans, as well as other deferred charges and prepaid expenses North American holding company Allianz of America, Inc. amounting to € 70 mn (2016: € 140 mn). The latter comprise the discount on borrowings from affiliated enterprises, issued bonds, and subordinated liabilities. 6 _ Interests in investment funds

Details on interests in investment funds in accordance with § 285 (26) 10 _ Excess of plan assets over pension and of the German Commercial Code: similar obligations € thou A part of the pension obligations is secured by reinsurance contracts Valuation Dividend and other plan assets respectively. As a different discount rate is Book value Fair value reserve distribution applied for these plan assets, compared to the calculation of the Equity funds settlement amount of the pension obligations, this results in an excess Allianz Global AC Equity Insights Fund 3,939 4,364 425 - of plan assets over pension and similar obligations for some pension Allianz Global Emerging plans. So far this amount has been netted with the exceeding joint Markets Equity Dividend Fund 3,000 4,062 1,062 79 liability. In 2017, the netting was carried out per pension plan. Allianz All China Equity I Fund 4,000 4,181 181 - Furthermore, netting the remuneration obligations for phased-in Subtotal equity funds 10,939 12,607 1,668 79 early retirement benefits with the plan assets also results in an excess Bond funds of plan assets over pension and similar obligations. Allianz RE Asia Fund 859,456 893,012 33,556 21,135 This results in the disclosure of an excess of plan assets over pen- PIMCO Covered Bond Source sion and similar obligations of € 11 mn (2016: € 0 mn). UCITS ETF 49,368 53,872 4,504 615 Allianz Emerging Markets Local Currency Bond Fund 3,891 3,891 - 240 PIMCO Select Funds U.S. High 11 _ Collateral Yield BB-B Bond 99,744 99,744 - 4,771 Allianz SE – PD Fund 35,855 35,963 108 776 Assets amounting to € 0.6 bn (2016: € 1.0 bn), of which € 0.6 bn Subtotal bond funds 1,048,314 1,086,482 38,168 27,537 (2016: € 0.6 bn) were in favor of affiliated enterprises, were pledged Mixed funds as collateral for liabilities. Allianz Global Dynamic Multi Asset Income 3,890 3,915 25 120 Total 1,063,143 1,103,004 39,861 27,736

Allianz SE holds more than 10.0 % of the respective shares of these investment funds. The fund shares can be redeemed each trading day.

62 Annual Report 2017 – Allianz SE

C _ Financial Statements of Allianz SE

SUPPLEMENTARY INFORMATION ON EQUITY AND LIABILITIES

12 _ Shareholders’ equity Board and pursuant to the authorization of the AGM on 5 May 2010. The granting of new shares to persons entitled under such convertible notes is secured by the Conditional Capital 2010/2014. On or before ISSUED CAPITAL 31 December 2017, there was no conversion of any such notes into Issued capital as of 31 December 2017 amounted to € 1,169,920.0 thou, new shares. divided into 440,249,646 registered shares. The shares have no-par value but a mathematical per-share value as a proportion of the CHANGES IN THE NUMBER issued capital. OF ISSUED SHARES OUTSTANDING

AUTHORIZED CAPITAL Number of issued shares outstanding As of 31 December 2017, Allianz SE had authorized capital with a 2017 2016 notional amount of € 550,000.0 thou for the issuance of new shares Number of issued shares outstanding as of 1 January 455,067,737 454,823,638 until 6 May 2019 (Authorized Capital 2014/I). The shareholders’ sub- Changes in number of treasury shares 562,546 244,099 scription rights can be excluded for capital increases against contri- Cancellation of issued shares (16,750,354) - bution in kind. For a capital increase against contributions in cash, the Number of issued shares outstanding as of shareholders’ subscription rights can be excluded: (i) for fractional 31 December 438,879,929 455,067,737 amounts, (ii) if the issue price is not significantly below the market Treasury shares1 1,369,717 1,932,263 Total number of issued shares 440,249,646 457,000,000 price and the shares issued under exclusion of the subscription rights 1_Thereof 1,369,131 (2016: 1.931.677) own shares held by Allianz SE. pursuant to § 186 (3) sentence 4 of the German Stock Corporation Act

(Aktiengesetz) do not exceed 10 % of the share capital, and (iii) to the extent necessary to grant a subscription right for new shares to the holders of bonds that carry conversion or option rights or provide for PROPOSAL FOR APPROPRIATION OF NET EARNINGS mandatory conversion. The subscription rights for new shares from The Board of Management and the Supervisory Board propose that the Authorized Capital 2014/I and the Conditional Capital the net earnings (“Bilanzgewinn”) of Allianz SE of € 4,117,338,522.10 2010/2014 may only be excluded for the proportionate amount of for the 2017 fiscal year shall be appropriated as follows: the share capital of up to € 233,728.0 thou (corresponding to 20 % of the share capital at year-end 2013). − Distribution of a dividend of € 8.00 per no-par share entitled to a In addition, Allianz SE has authorized capital (Authorized Capital dividend: € 3,511,039,432.00 2014/II) for the issuance of shares against cash until 6 May 2019. The − Unappropriated earnings carried forward: € 606,299,090.10 shareholders’ subscription rights can be excluded in order to issue new shares to employees of Allianz SE and its Group companies. As of The proposal for appropriation of net earnings reflects the 1,369,717 31 December 2017, the Authorized Capital 2014/II amounted to treasury shares held directly and indirectly by the company as of € 13,720.0 thou. 31 December 2017. Such treasury shares are not entitled to the divi-

dend pursuant to § 71b of the German Stock Corporation Act (AktG). CONDITIONAL CAPITAL Should there be any change in the number of shares entitled to the As of 31 December 2017, Allianz SE had conditional capital totaling dividend by the date of the Annual General Meeting, the above € 250,000.0 thou (Conditional Capital 2010/2014). This conditional proposal will be amended accordingly and presented for resolution capital increase will only be carried out if conversion or option rights on the appropriation of net earnings at the Annual General Meeting, attached to bonds which Allianz SE or its Group companies have with an unchanged dividend of € 8.00 per each share entitled to issued against cash payments according to the resolutions of the dividend. Annual General Meeting (AGM) on 5 May 2010 or 7 May 2014, are exercised or the conversion obligations under such bonds are fulfilled, TREASURY SHARES and only to the extent that the conversion or option rights or conver- As of 31 December 2017, Allianz SE held 1,369,131 (2016: 1,931,677) sion obligations are not serviced through treasury shares or through treasury shares. Of these, 343,102 (2016: 905,648) were held for shares from authorized capital. covering future subscriptions by employees in Germany and abroad Convertible subordinated notes totaling € 500,000.0 thou, which in the context of Employee Stock Purchase Plans, whereas may be converted into Allianz shares, were issued against cash in 1,026,029 (2016: 1,026,029) were held as a hedge for obligations July 2011. Within 10 years after the issuance a mandatory conversion from the Allianz Equity Incentive Program (former Group Equity Incen- of the notes into Allianz shares at the then prevailing share price may tive Program). apply if certain events occur, subject to a floor price of at least € 74.90 In the year ending 31 December 2017, 562,546 (2016: 617,084) per share. Within the same period, the investors have the right to shares were sold to employees of Allianz SE as well as its subsidiaries convert the notes into Allianz shares at a price of € 187.26 per share. in Germany and abroad in the context of the Employee Stock Pur- Both conversion prices are as of inception and subject to anti-dilution chase Plan. These shares were taken from the stock of treasury shares provisions. The subscription rights of shareholders for these converti- dedicated to this purpose. In 2017, as in the previous year, no capital ble notes have been excluded with the consent of the Supervisory increase for the purpose of Employee Stock Purchase Plans was un-

Annual Report 2017 – Allianz SE 63

C _ Financial Statements of Allianz SE

dertaken. Employees of the Allianz Group purchased shares at prices RESTRICTIONS ON DIVIDEND PAYOUT ranging from € 108.04 (2016: € 94.54) to € 158.72 (2016: € 121.84) per The unappropriated reserves plus the unappropriated earnings share. As of 31 December 2017, the remaining treasury shares of carried forward are not fully available for the distribution of a divi- Allianz SE held for covering subscriptions by employees in the context dend due to legal restrictions. of the Employee Stock Purchase Plan of Allianz SE and its subsidiar- The unappropriated reserves of Allianz SE correspond to the ies in Germany and abroad amounted to 343,102 shares. other revenue reserves. In the year ending 31 December 2017, the total number of Of the unappropriated reserves plus the unappropriated earn- treasury shares of Allianz SE decreased by 562,546 (2016: decrease of ings carried forward, a total of € 929,512 thou (2016: € 772,254 thou)

244,099), which corresponds to € 1,494,910.50 (2016: € 624,893.00) or is exempt from dividend distribution. Of this amount, € 896,687 thou

0.13 % (2016: 0.05 %) of issued capital as of 31 December 2017. (2016: € 749,686 thou) are due to the change in the legal require- The treasury shares of Allianz SE and its subsidiaries represent ment in 2016 for discounting pension obligations according to

€ 3,638 thou (2016: € 4,945 thou) or 0.31 % (2016: 0.42 %) of the issued § 253 (2) sentence 1 in connection with § 253 (6) of the German Com- capital as of 31 December 2017. mercial Code. Another, € 3,638 thou (2016: € 4,945 thou) relate to the mathematical value of own shares deducted from issued capital

SHARE BUY-BACK PROGRAM 2017 according to § 272 (1a) of the German Commercial Code. Another In its meeting on 16 February 2017, the Board of Management of € 29,187 thou (2016: € 17,623 thou) account for internally generated

Allianz SE has resolved to conduct a share buy-back program in an intangible assets according to § 268 (8) of the German Commercial amount of up to € 3 bn within a period of twelve months. The share Code. buy-back program is based on the authorization granted by the Annual General Meeting on 7 May 2014. In the period between 17 February 2017 and 15 December 2017, total of 16,750,354 treas- 13 _ Subordinated liabilities ury shares with a market value of € 2,999,969,793.55 have been acquired for an average price of € 179.10. All of the treasury shares Subordinated liabilities decreased to € 13.7 bn in 2017 (2016: acquired within the share buy-back program 2017 have been re- € 13.8 bn). € 10.3 bn (2016: € 8.9 bn) were external subordinated deemed according to the simplified procedure without reduction of liabilities resulting from bonds directly issued by Allianz SE. In 2017, the share capital. Allianz SE placed two new subordinated bonds with volumes of € 1.0 bn and of USD 0.6 bn (equals € 0.6 bn). This was partly offset by Additional paid-in capital a book value decline of € 0.2 bn, a consequence of the foreign- € thou currency revaluation of our subordinated liabilities denominated in USD and CHF. As of 31 December 2016 27,844,664 Further, intra-group subordinated liabilities amounting to Own shares: realized gains 60,592 € 3.4 bn (2016: € 4.9 bn) were attributable to subordinated bonds As of 31 December 2017 27,905,256 issued by Allianz Finance II B.V., an affiliated enterprise that usually

transfers the proceeds from these issues to Allianz SE via intra-group loans. In 2017, Allianz Finance II B.V. redeemed a subordinated bond Revenue reserves with a volume of € 1.4 bn. Allianz SE provides a financial guarantee € thou for the total amount of bonds issued by Allianz Finance II B.V. Own shares exceeding mathematical Own shares: as of 31 December 2016 value Cancellation1 2017 1. Statutory reserves 1,229 - - 1,229 2. Other revenue reserves2 11,782,928 38,566 (2,997,705) 8,823,789 Total 11,784,157 38,566 (2,997,705) 8,825,017

1_Share buy-back program 2017: Acquisition costs of the repurchased and cancelled shares of Allianz SE. 2_Thereof reserves for own shares € 3,638 thou (2016: € 4,945 thou).

64 Annual Report 2017 – Allianz SE

C _ Financial Statements of Allianz SE

14 _ Insurance reserves

€ mn

Reserves for loss and loss Claims Unearned Aggregate policy adjustment Reserves for equalization and Other insurance as of 31 December 2017 premiums reserves expenses premium refunds similar reserves reserves Total Motor 480 - 2,908 - 302 5 3,695 Fire and property reinsurance 461 - 1,893 - 611 7 2,973 Liability 210 - 3,215 - 441 3 3,869 Credit and bond 21 - 446 21 493 2 983 Personal accident 38 41 492 - 3 2 577 Life 40 640 94 - - 6 780 Marine and aviation 20 - 440 - 74 - 534 Legal expenses 47 - 274 - 38 2 361 Health 2 1 13 - - - 17 Other lines 256 - 353 - 579 3 1,192 Total 1,576 682 10,128 23 2,541 30 14,980

The development of the insurance reserves was mainly driven by RESERVES FOR LOSS AND LOSS ADJUSTMENT increased reserves for loss and loss adjustment expenses due to the EXPENSES overall portfolio growth in the last years. Reserves for loss and loss adjustment expenses increased by 4.0 % to € 10,128 mn, largely due to the growth of the portfolio in the last years. AGGREGATE POLICY RESERVES Aggregate policy reserves declined by € 105 mn to € 682 mn due to CLAIMS EQUALIZATION AND SIMILAR RESERVES the Life/Health reinsurance. In 2017, claims equalization and similar reserves rose by € 226 mn to € 2,541 mn. The increase resulted mainly from other reinsurance lines (€ 111 mn), credit and bond reinsurance (€ 53 mn), and liability reinsurance (€ 47 mn). 15 _ Other provisions

Development of other provisions € thou

Reversal of Provision Use Release1 Additions1 Discounting Provision 1 January 2017 (-) (-) (+) (+) 31 December 2017 Provisions for pensions and similar liabilities 6,066,802 262,396 2,117 81,475 534,411 6,418,175 Tax provisions 541,230 4,917 35,292 357,199 - 858,220 Miscellaneous 1. Anticipated losses 336,896 181,228 30,823 143,029 1,227 269,102 2. Remaining provisions 424,213 245,173 71,212 294,184 2,471 404,483 Total 7,369,141 693,714 139,444 875,888 538,109 7,949,981

1_Including currency translation effects.

Other provisions increased by € 581 mn, largely due to a net increase pension promises. The German subsidiaries reimburse the costs, with in pension liabilities (€ 351 mn) and tax provisions (€ 317 mn). Mis- Allianz SE assuming responsibility for settlement. Consequently, these cellaneous provisions dropped by € 87 mn, driven by declines in both pension provisions are reported by Allianz SE. the provisions for anticipated losses (€ 68 mn) and the remaining As of 1 January 2015, Allianz SE completely assumed the obliga- provisions (€ 20 mn). tions resulting from the agents pension fund (“Vertreterversorgungs- Allianz SE has made pension promises for which pension provi- werk” – VVW) from Allianz Beratungs- und Vertriebs-AG. Effective sions are recognized. Part of these pension obligations are secured from 1 January 2017, the German subsidiaries reimburse only the by a “Contractual Trust Arrangement” (Methusalem Trust e.V.). These service costs for their employees. There is no cost reimbursement trust assets constitute offsettable plan assets, with the asset value/ anymore for the risks arising from changes in interest rate, inflation, market value being used as the fair value. and mortality tables. In 1985, the pension provisions of the German subsidiaries were centralized by transferring the corresponding assets to Allianz SE. As a result, Allianz SE has a joint liability for a large part of these old

Annual Report 2017 – Allianz SE 65

C _ Financial Statements of Allianz SE

The following table shows a breakdown of pension liabilities: The mortality tables used are the current RT2005G-tables ac- cording to Heubeck, which have been adjusted with respect to mor- Settlement amount of the offset liabilities tality, disability, and labor turnover to reflect company-specific cir- € thou cumstances. as of 31 December 2017 2016 The retirement age applied is the contractual or legal retirement Old pension promises of the German subsidiaries 1,854,607 1,808,224 age. Pension promises of Allianz SE Vertreterversorgungswerk 4,576,550 4,285,330 Supplementary information old pension promises to employees 202,381 194,941 € thou

contribution-based pension plans 202,858 184,826 as of 31 December 2017 2016 deferred compensation 100,848 87,006 Historical costs of the offset assets 522,640 488,562 Total 6,937,244 6,560,327

Settlement amount of the offset liabilities 6,937,244 6,560,327 (-) Fair value of the offset assets 529,751 493,525 Net amount of pension provisions and excess of The settlement amount is calculated on the basis of the projected plan assets over pension and similar obligations 6,407,493 6,066,802 unit credit method and/or reported as the present value of the en- titlements acquired. In the case of security-linked pension plans, the fair value of the offset assets is shown. Due to the fact that there is no employment relationship be- Allianz SE has obligations resulting from jubilee payments, a long- tween the tied agents and Allianz SE, and since Allianz Beratungs- term credit account, birthday payments, and phased-in early retire- und Vertriebs-AG no longer reimburses any costs, the pension obliga- ment, which are reported under remaining provisions. tions resulting from the VVW are recorded at their full present value. These obligations are basically calculated in the same way as the pension obligations, using the same actuarial assumptions (ex- Actuarial parameters cept for the discount rate). % Offsettable plan assets are held at Methusalem Trust e.V. to se- as of 31 December 2017 2016 cure the phased-in early retirement and long-term credit account Applied discount rate (10-year-average) 3.68 4.01 obligations. The asset value/market value is used as the fair value. Applied discount rate (7-year-average) 2.81 3.23 The following table shows a breakdown of the offset assets and Rate of assumed pension trend 1.50 1.50 liabilities resulting from the phased-in early retirement and long-term Rate of assumed salary increase (inclusiv average career trend) 3.25 3.25 credit account obligations.

Information on the offset assets and liabilities € thou

Contrary to the above rates, part of the pension promises are calcu- as of 31 December 2017 2016 lated using a guaranteed interest rate of 2.75 % p.a. and a guaran- Historical costs of the offset assets 19,740 19,513 Settlement amount of the offset liabilities 19,912 19,691 teed pension increase rate of 1.00 % p.a. of these pension promises. Fair value of the offset assets 20,755 20,530

66 Annual Report 2017 – Allianz SE

C _ Financial Statements of Allianz SE

16 _ Maturity of financial liabilities

The residual terms of subordinated liabilities, bonds issued, and mis- cellaneous liabilities are as follows:

Maturity table as of 31 December 2017 € thou

Term Term Term Total < 1 year 1 – 5 years > 5 years Subordinated liabilities (B.) Intra-group transmission of proceeds from third-party financing 3,412,136 112,136 - 3,300,000 Subordinated bonds issued by Allianz SE 10,277,091 122,335 1,500,000 8,654,756 Subtotal Subordinated liabilities (B.) 13,689,227 234,471 1,500,000 11,954,756 Bonds (intra-group – F.II.) 2,353,545 1,807,545 150,000 396,000 Liabilities to banks (F.III.) 490 490 - - Miscellaneous liabilities (F.IV.) Intra-group transmission of proceeds from third-party financing 7,278,317 788,913 4,125,000 2,364,404 Other intra-group liabilities1 31,118,903 20,680,613 10,338,290 100,000 Subtotal intra-group miscellaneous liabilities 38,397,220 21,469,526 14,463,290 2,464,404 Liabilities to third parties 1,338,304 1,338,304 - - Subtotal Miscellaneous liabilities 39,735,524 22,807,830 14,463,290 2,464,404 Total 55,778,786 24,850,336 16,113,290 14,815,160

1_As of 31 December 2017, other intra-group liabilities due within one year armounted to € 20.7 bn. Thereof, cash pool and intra-group loans accounted for € 14.0 bn and € 5.7 bn, respectively. Upon maturity, intrag-roup loans are rolled forward by Allianz SE on a regular basis.

Maturity table as of 31 December 2016 € thou

Term Term Term Total < 1 year 1 – 5 years > 5 years Subordinated liabilities (B.) Intra-group transmission of proceeds from third-party financing 4,868,974 168,974 - 4,700,000 Subordinated bonds issued by Allianz SE 8,937,306 100,658 - 8,836,648 Subtotal Subordinated liabilities (B.) 13,806,280 269,632 - 13,536,648 Bonds (intra-group – F.II.) 2,575,931 379,931 1,800,000 396,000 Liabilities to banks (F.III.) 397,574 397,574 - - Miscellaneous liabilities (F.IV.) Intra-group transmission of proceeds from third-party financing 5,177,377 173,745 2,625,000 2,378,632 Other intra-group liabilities1 28,251,667 27,059,263 1,092,404 100,000 Subtotal intra-group miscellaneous liabilities 33,429,044 27,233,008 3,717,404 2,478,632 Liabilities to third parties 1,288,151 1,288,151 - - Subtotal Miscellaneous liabilities 34,717,195 28,521,159 3,717,404 2,478,632 Total 51,496,980 29,568,296 5,517,404 16,411,280

1_As of 31 December 2016, other intra-group liabilities due within one year armounted to € 27.1 bn. Thereof, cash pool and intra-group loans accounted for € 9.3 bn and € 17.0 bn, respectively. Upon maturity, intra-group loans are rolled forward by Allianz SE on a regular basis.

As of 31 December 2017, € 0.8 bn (2016: € 0.6 bn) of the total finan- cial liabilities were secured by assets pledged as collateral.

Annual Report 2017 – Allianz SE 67

C _ Financial Statements of Allianz SE

17 _ Information about derivative financial instruments

Options dealing in shares and share indices as of 31 December 2017

Nominal Fair value Book value Underlying Balance sheet position Class € thou € thou € thou Long call 44,392 5,280 4,301 Share index Assets D.III. Short call 44,392 (5,280) 4,301 Share index Liabilities F.IV. Long put 88,380 636 1,956 Share index Assets D.III. Short put 88,380 (636) 1,956 Share index Liabilities F.IV.

Options on stock indices are held in the context of hedging activities based on the market information available on the valuation date. of other entities of the Allianz Group. Allianz SE has hedged intra- Yield curves are derived from the swap rates prevailing on the valua- group positions by entering into countertrade agreements at the tion date. The future dividend yield is estimated on the basis of mar- market. Both intra-group and group-external positions were com- ket information on the valuation date. The volatility is estimated bined into valuation units (“Bewertungseinheiten”) representing based on currently traded implicit volatility, taking into account the perfect micro hedges. The opposing value changes within these units residual term and the ratio between the strike price and the prevail- completely offset each other and are not recorded in either our in- ing share price. come statement or our balance sheet. European-type options are valued using the Black Scholes mod- el, American-type options are valued using the binomial model,

Forward contracts in shares, share indices and hedge RSU as of 31 December 2017

Nominal Fair value Book value Underlying Balance sheet position Class € thou € thou € thou Long forward 574,476 60,497 449 Allianz SE share Liabilities D. Long forward 379,731 (33,997) – UniCredit S.p.A. share – Long forward 368,275 4,234 – China Pacific Insurance (Group) Co., Ltd. share – Short forward 379,731 33,997 – UniCredit S.p.A. share – Short forward 368,275 (4,234) – China Pacific Insurance (Group) Co., Ltd. share – Hedge RSU 295,637 (452,219) 452,228 Allianz SE share Liabilities F.IV.

The positions in long forwards on Allianz SE shares and in hedge RSU The fair value of a forward contract is determined as the differ- are held in the context of hedging the Allianz Equity Incentive Plans. ence between the underlying closing price on the valuation date and For the purpose of hedging the share price risk of UniCredit the discounted forward price. The net present value of dividend pay- S.p.A. shares and of the shares in China Pacific Insurance (Group) Co., ments due before maturity of the forward contract is also taken into Ltd., our subsidiary Allianz Finance II Luxembourg S.à.r.l. entered into account, unless dividends are subject to a pass-through agreement. short forwards on these underlyings with Allianz SE. Allianz SE Liabilities from hedge RSU, which the Group companies acquire from hedged these positions by entering into countertrade agreements in Allianz SE to hedge their liabilities from the Group Equity Incentive the market. Both intra-group and group-external positions were programs, are valued on the basis of the Allianz closing price on the combined to form valuation units (“Bewertungseinheiten”) represent- valuation date minus the net present value of estimated future divi- ing perfect micro hedges. The opposing value changes within these dends due before maturity of the respective hedge RSU. Applicable units completely offset each other and are not recorded in either our discount rates are derived from inter­polated swap rates. income statement or our balance sheet.

68 Annual Report 2017 – Allianz SE

C _ Financial Statements of Allianz SE

Forward currency contracts as of 31 December 2017

Nominal Fair value Book value Underlying Balance sheet position Class € thou € thou € thou AED, AUD, BRL, CAD, CHF, COP, CZK, DKK, GBP, HKD, HUF, ILS, Long forward 6,928,210 (117,691) 104,447 JPY, KRW, NOK, NZD, PLN, QAR, SAR, SGD, THB, TRY, TWD, USD Liabilities D. AED, AUD, BRL, CAD, CHF, CNY, COP, CZK, DKK, GBP, HKD, HUF, Short forward 11,393,759 224,794 23,644 JPY, MYR, NOK, PLN, QAR, SEK, SGD, THB, TRY, USD, ZAR Liabilities D.

Allianz SE holds long and short positions in various currencies in order external counterparts, respectively, form a perfect micro hedge be- to manage foreign exchange risk within Allianz SE and other entities cause the fair value changes of the diametric positions completely of the Allianz Group. compensate each other. The fair value of a forward currency contract is the difference be- Within the financial participations, there are put and call options tween the discounted forward price and the spot rate in Euro. The on company shares which are linked to certain conditions. Due to the discounted forward price is calculated by applying the Euro interest lack of quoted prices on active markets for these financial participa- rate as a discount rate and the foreign currency interest rate as a tions and the uncertainty regarding the occurrence of the option compound interest rate. conditions, it is not possible to reliably determine the fair value of Long forwards and short forwards with a nominal value of such options. Wherever feasible, contractual arrangements including € 2.9 bn and a fair value of € 23.8 mn, respectively, were aggregated the option agreements were taken into account when determining to form valuation units (“Bewertungseinheiten”) and accounted for the fair value of the financial participation. We did not perform a with a book value of zero. In each case, diametrical positions with stand-alone valuation of the options as derivative financial instru- identical terms and conditions closed with intra-group and group- ments.

Swap contracts as of 31 December 2017

Nominal Fair value Book value Underlying Balance sheet position Class € thou € thou € thou Receiver swap EUR 1,500,000 (3,611) 3,611 Long-term interst rate positions Liabilities D.

Allianz SE has entered into an EUR interest rate swap agreement to The fair value of an interest rate swap is the aggregate net pre- hedge interest rate risk arising from its interest rate positions. sent value of all incoming and outgoing cash flows expected for the swap transaction.

Annual Report 2017 – Allianz SE 69

C _ Financial Statements of Allianz SE

SUPPLEMENTARY INFORMATION ON THE INCOME STATEMENT

18 _ Gross premiums written 22 _ Underwriting expenses (net)

€ thou € thou

2017 2016 2017 2016 Property-Casualty reinsurance 9,857,787 10,385,480 Gross (2,930,442) (3,063,930) Life/Health reinsurance 407,648 434,810 Ceded 46,213 117,682 Total 10,265,435 10,820,290 Net (2,884,228) (2,946,248)

Gross premiums written decreased by 5.1 % to € 10,265 mn. This The decrease of underwriting expenses (net) was mainly influenced decrease is driven by the lines of business motor reinsurance by the premium development, the expenses ratio stayed stable with

(€ 282 mn), fire reinsurance (€ 130 mn) and liability reinsurance 30.6 % (2016: 30.6 %). (€ 64 mn). 23 _ Investment income 19 _ Allocated interest return (net) € thou

The amount of interest income transferred from the non-technical 2017 2016 section to the technical section was calculated in accordance with a) Income from affiliated enterprises and participations thereof from affiliated enterprises: § 38 RechVersV and remained stable with € 21 mn. € 1,052,491 thou (2016: € 1,722,849 thou) 1,098,617 1,726,629 b) Income from other investments thereof from affiliated enterprises: € 464,023 thou (2016: € 473,296 thou) 20 _ Run-off result ba) Income from real estate, real estate rights, and buildings including buildings on land not owned by Allianz SE 9,443 27,532 In 2017, the positive run-off result in Property-Casualty amounted to bb) Income from other investments (see below) 850,142 916,897 € 343 mn (2016: € 427 mn) and was primarily owed to the positive c) Income from reversal of impairments 10,450 105,206 development of the following four lines of business: d) Realized gains 653,231 365,486 e) Income from profit transfer agreements 3,025,630 1,943,136 Total 5,647,514 5,084,886 − fire reinsurance (€ 122 mn),

− engineering reinsurance (€ 103 mn), 2017 2016 − personal accident reinsurance (€ 49 mn), bb) Income from other investments − credit and bond reinsurance (€ 48 mn). Loans to affiliated enterprises 386,536 416,928 Debt securities 314,979 385,837 Funds held by others under reinsurance business assumed 79,852 72,124 21 _ Change in other insurance reserves (net) Interests in funds 39,808 24,935 Loans to third parties 1,301 6,282 € thou Receivables from intra-group cash pooling 20,473 7,450 2017 2016 Bank deposits 4,795 2,686 Change in aggregate policy reserves (net) 17,954 3,931 Other 2,398 655 Other insurance reserves (net) 2,139 2,794 Total 850,142 916,897 Total 20,093 6,725

The change in aggregate policy reserves (net) was driven by de- creased business volume due to a recapture of several reinsurance contracts in Life/Health reinsurance. The other insurance reserves (net) mostly include reserves for credit and bond reinsurance and motor reinsurance.

70 Annual Report 2017 – Allianz SE

C _ Financial Statements of Allianz SE

24 _ Investment expenses The net result from currency translation amounted to € 664 mn after € 24 mn in the previous year. The considerably positive result in 2017 € thou was mainly driven by currency translation gains on liabilities denomi- 2017 2016 nated in USD due to a significantly weaker USD. These gains were a) Expenses for the management of investments, economically compensated by currency-translation losses on invest- interest, and other investment-related expenses ments denominated in USD. These losses are generally shown within aa) Interest expenses (see below) (1,000,900) (1,021,215) the investment result. In 2017, however, they were only partly reflect- ab) Other (92,073) (84,983) b) Depreciation and impairments of investments (266,668) (182,873) ed in the income statement as they largely represented a decline of c) Realized losses (130,532) (198,564) unrealized gains created in the past without impact on net income. d) Expenses from losses taken over (444,635) (307,823) Allianz SE has a joint liability for a large part of the pension pro- Total (1,934,808) (1,795,458) visions of its German subsidiaries (see note 15 for more details). Costs incurred in this context are recognized as service expenses from 2017 2016 pension plans charged to group companies, as they are reimbursed aa) Interest expenses by the German subsidiaries according to the cost allocation contract Subordinated bonds issued by Allianz SE (406,622) (323,824) and result in corresponding service revenues. Liabilities from intra-group loans (226,162) (270,917) The decline in income from the release of other provisions was Intra-group subordinated liabilities largely due to the reduction of the assumed pension trend from 1.7 % (intra-group transmission of proceeds from third-party financing) (208,861) (267,960) to 1.5 % in 2016. As a result, the income from the release of pension Liabilities from intra-group bonds (107,023) (111,109) provisions had amounted to € 143 mn in the previous year. Liabilities from intra-group cash pooling (24,637) (29,860) The increase in interest and similar expense of € 404 mn was Liabilities from commercial paper issues (12,996) (8,647) predominantly caused by a year-on-year higher interest expense Other (14,599) (8,898) regarding the addition to the pension provisions of € 397 mn. As a Total (1,000,900) (1,021,215) result of a change in legislation, effective from 2016, the interest rate

used for calculating the pension obligations has to be determined as a 10-year-average instead of a 7-year-average. Applying this change The depreciation and impairments of investments include unsched- in 2016 led to a higher interest rate, which in turn led to low interest uled write-downs of € 8 mn (2016: € 51 mn) on holdings in affiliated expense compared to 2017. enterprises and € 0 mn (2016: € 7 mn) on real estate. Furthermore, the items other income and other expenses include the following offset income and expenses:

€ thou 25 _ Other non-technical result 2017 € thou Pensions and similar Other 2017 2016 obligations obligations Other Income Actual return of the offset assets (17,136) (145) Currency gains 1,569,244 1,018,676 Imputed interest cost for the settlement amount of the offset Gains on derivatives 1,099,634 1,135,670 liabilities 256,598 255 Other service revenues from group companies 214,088 179,192 Effect resulting from the change in the discount rate for the settlement amount 294,911 17 Income due to adjustment of cost allocation contract 153,454 147,827 Net amount of the offset income and expenses 534,373 127 Income from the release of other provisions 53,928 158,528

Intercompany income 31,788 39,798 Service revenues from pensions charged to group companies 23,394 32,912 Other 12,969 5,933 FEES TO THE AUDITOR Total other income 3,158,500 2,718,536 The fees for audit services of KPMG AG Wirtschaftsprüfungsgesell- Other expenses schaft primarily relate to services rendered for the audit of the Currency losses (904,962) (994,231) Allianz Group’s consolidated financial statements as well as the audit Expenses on derivatives (895,723) (998,915) of the statutory financial statements of Allianz SE and its subsidiaries, Interest and similar expenses (567,124) (163,233) including the statutory audit scope extensions required by law (e.g. Other HR-related expenses (352,071) (285,837) Solvency II). In addition, reviews were performed of interim financial Other service expenses to group companies (214,088) (179,192) statements, project-related IT audits as well as contractual reviews on Anticipated losses on derivatives (147,198) (189,683) the effectiveness of controls of service companies. Pension expenses (78,613) (28,675) Other attestation services refer to statutory filing services for Service expenses from pensions charged to group companies (23,394) (32,912) regulatory purposes, the issuing of comfort letters, and statutory or Expenses for financial guarantees (15,366) (42,586) contractually agreed assessments, as well as required audits of funds, Other (227,380) (262,663) including contractually agreed assurance services. Total other expenses (3,425,921) (3,177,927) Tax services primarily include support in the preparation of tax Other non-technical Result (267,421) (459,391) returns and advice on individual matters. In respect to tax services, significant tax advice services in relation to the German Investment Tax Reform were provided.

Annual Report 2017 – Allianz SE 71

C _ Financial Statements of Allianz SE

Other services primarily refer to quality assurance support services The greatest differences between accounting and tax-based valua- and consulting services in connection with current developments in tion concern the balance sheet items reserves for loss and loss ad- financial reporting and regulatory requirements based on con- justment expenses, pension accruals, and liabilities resulting in de- cepts/solutions presented by Allianz. In addition, IT quality assurance ferred tax assets. and advisory on non-financial information systems and forensic In addition, the existing corporate tax loss increases the surplus advisory services were provided. In respect to the other services, of deferred tax assets. significant quality assurance services in relation to the initial applica- tion of new/prospective accounting standards, such as IFRS 17 and The valuation of the domestic deferred taxes is based on the follow- IFRS 9, application were provided. ing tax rates:

Details of the fees to the auditor pursuant to § 285 No. 17 HGB for services to Allianz SE can be found in the notes to the Allianz Group’s − 31.0 % differences in balance sheet items, consolidated financial statements. − 15.8 % corporate tax losses,

− 15.2 % trade tax losses. 26 _ Income taxes 27 _ Net earnings In 2017, our tax income, most of which relates to our net operating € thou income, decreased to € 122 mn (2016: € 266 mn). As the controlling company (“Organträger”) of the tax group, 2017 2016 Allianz SE files a consolidated tax return with most of its German Net income 3,671,418 2,947,614 affiliated enterprises. As long as the corporate income tax loss carried Unappropriated earnings carried forward 445,920 908,252 forward is not fully utilized, the tax compensation payments as of Net earnings 4,117,339 3,855,866

€ 515 mn (2016: € 523 mn) received from members of the tax group result in a tax income.

72 Annual Report 2017 – Allianz SE

C _ Financial Statements of Allianz SE

OTHER INFORMATION

Contingent liabilities, other financial foreseeable future. However it is not possible for Allianz SE to predict commitments, and legal proceedings the ultimate payment obligations at this point in time. As of 31 December 2017, other guarantee commitments given by Allianz SE amounted to € 12 mn. As of today and to the best of CONTINGENT LIABILITIES our knowledge, we assess the probability of a loss resulting from other guarantees to be extremely remote. GUARANTEES RELATING TO ALLIANZ GROUP COMPANIES LEGAL OBLIGATIONS The following guarantees have been provided by Allianz SE to Legal obligations to assume any losses arise on account of manage- Allianz Group companies as well as to third parties with regard to the ment control agreements and/or profit transfer agreements with the liabilities of certain Allianz Group companies: following companies:

− bonds issued by Allianz Finance II B.V. and Allianz Finance III B.V. − Allianz Argos 14 GmbH, for € 12.3 bn, of which € 3.3 bn were on a subordinated basis, − Allianz Asset Management GmbH, − commercial papers issued by Allianz Finance Corporation. As of − Allianz Capital Partners GmbH 31 December 2017, USD 0.2 bn in commercial papers were is- (terminated as of 31 December 2017), sued as part of the program, − Allianz Deutschland AG, − letters of credit issued to various Allianz Group companies − Allianz Finanzbeteiligungs GmbH, amounting to € 0.9 bn. − Allianz Global Corporate & Specialty SE, − Allianz Global Health GmbH, The guarantees refer to possible future events that could lead to an − Allianz Investment Management SE, obligation. As of today, and to the best of our knowledge, we assess − Allianz Technology SE, the probability of a loss resulting from outstanding guarantees to be − Allianz Real Estate GmbH, extremely remote. − AZ-Arges Vermögensverwaltungsgesellschaft mbH, Guarantee declarations totaling € 1.1 bn have also been made for − IDS GmbH-Analysis and Reporting Services. life policies signed by Allianz Companía de Seguros y Reaseguros S.A. Allianz SE provides a € 1.0 bn guarantee for the obligations of OTHER FINANCIAL COMMITMENTS Allianz Vie S.A. under a unit-linked pension insurance contract. Advertising agreements incurred financial obligations of € 102 mn. Contingent liabilities exist because of indirect pension promises Security deposits for rental contracts amounted to € 0.1 mn in organized via pension funds (Allianz Versorgungskasse VVaG) and financial commitments. support funds (Allianz Pensionsverein e.V.). Allianz SE has a joint liability of € 435 mn for a part of the pension promises of its German LITIGATION subsidiaries. Allianz SE is involved in legal, regulatory, and arbitration proceed- In the context of the sale of investments, guarantees were given ings. Such proceedings arise in the ordinary course of business, includ- in individual cases to cover counterparty exposure or the various ing, amongst others, Allianz SE’s activities as a reinsurance company, bases used to determine purchase prices. employer, investor and taxpayer. It is not feasible to predict or deter- Allianz SE has also provided several subsidiaries and associates mine the ultimate outcome of the pending or threatened proceed- with either a standard indemnity guarantee or such guarantees as ings. Management does not believe that the outcome of these pro- required by the supervisory authorities, which cannot be quantified. ceedings, including the one discussed below, will have a material These include, in particular, a deed of general release as against the adverse effect on the financial position and the results of Allianz SE, Federal Association of German Banks (“Bundesverband deutscher after consideration of any applicable provisions. Banken e.V.”) for Oldenburgische Landesbank AG (OLB), in accord- On 24 May 2002, pursuant to a statutory squeeze-out procedure,

ance with § 5 (10) of the Statute of Deposit Security Arrangement the general meeting of Dresdner Bank AG resolved to transfer shares Fund. In connection with the sale of OLB in February 2018, Allianz SE from its minority shareholders to Allianz as the principal shareholder, terminated the indemnification undertaking; however, it remains in return for payment of a cash settlement amounting to € 51.50 per applicable with respect to supporting measures that are based on share. Allianz established the amount of the cash settlement on the facts that were already existing at the time of termination. basis of an expert opinion and its adequacy was confirmed by a In addition, Allianz SE has issued guarantees to various court-appointed auditor. Some of the former minority shareholders Allianz Group companies totaling € 476 mn. applied for a court review of the appropriate amount of the cash settlement in a mediation procedure (“Spruchverfahren”). In Septem- OTHER GUARANTEES TO THIRD PARTIES ber 2013 the district court (“Landgericht”) of Frankfurt dismissed the A contingent indemnity agreement has been entered into with re- minority shareholders’ claims in their entirety. This decision has been spect to securities issued by HT1 Funding GmbH in case HT1 Funding appealed to the higher regional court (“Oberlandesgericht”) of GmbH cannot serve the agreed coupon of the bond in part or in Frankfurt. In the event that a final decision were to determine a high- total. Allianz SE expects not to be obliged to make a payment in the

Annual Report 2017 – Allianz SE 73

C _ Financial Statements of Allianz SE

er amount as an appropriate cash settlement, this would affect all of BENEFITS TO RETIRED MEMBERS OF THE BOARD OF the approximately 16 mn shares that were transferred to Allianz. MANAGEMENT In 2017, remuneration and other benefits of € 7 mn (2016: € 7 mn) were paid to retired members of the Board of Management and to Board Members surviving dependents of deceased former Board members. The pension obligations for former members of the Board of All supervisory board members, current or having resigned during the Management and their surviving dependents are as follows: year, and all board members, current or having resigned during the € thou year, are denoted on pages 7 and 8. Their memberships in super- visory boards or similar committees of other enterprises are also as of 31 December 2017 2016 mentioned on these pages. Historical costs of the offset assets 105,768 94,006 Fair value of the offset assets 105,768 94,006 Settlement amount of the offset liabilities 109,498 96,826 Board of Management remuneration1 Pension provisions 3,730 2,820

As of 31 December 2017, the Board of Management was comprised of nine members. The following expenses reflect the full Board of The asset value of the pension plan reinsurance contracts is taken as Management active in the respective year. a basis for the fair value of the offset assets. The remuneration of the Board of Management includes fixed and variable components. 5 The variable remuneration consists of the annual bonus (short- Supervisory Board remuneration term), the mid-term bonus (MTB) and the equity-related remunera- tion (long-term). In 2017, the equity-related remuneration was com- 2017 2016 2 3 prised of 49,385 (2016: 66,694 ) Restricted Stock Units (RSU). € thou % € thou % Fixed remuneration (1,446) 66.4 (1,408) 69.5 Board of Management remuneration Committee-related remuneration (672) 30.8 (558) 27.5 € thou Attendance fees (61) 2.8 (59) 3.0 2017 2016 Total (2,179) 100.0 (2,025) 100.0 Base salary (7,125) (7,125)

Annual bonus (8,370) (8,911) Perquisites (205) (302) Subtotal Base salary, Annual bonus and Perquisites (15,700) (16,338) Fair value of RSU at grant date (8,370) (8,911) Average number of employees Subtotal equity-related remuneration (8,370) (8,911) Total (24,070) (25,249) Excluding members of the Board of Management, trainees, interns,

employees in the passive phase of early retirement and on early retirement, and employees on maternity leave or voluntary mili- The total remuneration of the Board of Management of Allianz SE for tary/federal voluntary service. 2017 (excluding the relevant MTB 2016 – 2018 tranche) amounted to

4 € 24,070 thou (2016: € 25,624 thou ). 2017 2016 Full-time staff 1,300 1,389 EQUITY-RELATED REMUNERATION Part-time staff 340 226 The remuneration system as of 1 January 2010 only awards RSU. For Total 1,640 1,615 2017, the fair value of the RSU at the date of grant was € 8,370 thou

(2016: € 8,911 thou).

1_For detailed information regarding the Board of Management remuneration, please refer to the Remuneration Report starting on page 37. 2_The relevant share price to determine the final number of RSU granted is only available after the sign-off by the external auditors, thus numbers are based on a best estimate.

3_The disclosure in the Annual Report 2016 was based on a best estimate of the RSU grants. The figure shown here for 2016 now includes the actual fair value as of the grant date (3 March 2017). The value therefore differs from the value disclosed last year. 5_For detailed information regarding the Supervisory Board remuneration, please refer to the Remuneration Report 4_Including the payment of the MTB tranch for Jay Ralph of € 375 thou. starting on page 37.

74 Annual Report 2017 – Allianz SE

C _ Financial Statements of Allianz SE

Staff expenses Mandates of the Members of the Supervisory Board and Board of Management Including members of the Board of Management, trainees, interns, employees in the passive phase of early retirement, and employees The disclosures required in accordance with § 285 No. 10 HGB for the on maternity leave or voluntary military/federal voluntary service. Supervisory Board and Board of Management can be found on pages 7 and 8. € thou

2017 2016 Wages and salaries (380,643) (318,337) Information pursuant to § 160 (1) No. 8 AktG Statutory welfare contributions and expenses for optional support payments (24,701) (22,305) The following major shareholdings were reported pursuant to § 20 (1) Expenses for pensions and other post-retirement benefits (26,501) (23,313) 1 or (4) AktG or pursuant to § 21 WpHG : Total expenses (431,845) (363,955) By way of a letter dated 25 July 2017, BlackRock Inc., Wilming-

ton, Delaware, United States of America, notified in the course of a voluntary group notification with triggered threshold on subsidiary

level its voting rights pursuant to § 21 (1) WpHG as of 20 July 2017 Events after the balance sheet date amounting to 6.90 % (representing 31,026,017 shares), its holdings in instruments pursuant to § 25 (1) No. 1 WpHG as of 20 July 2017,

amounting to 0.001 % (representing 3,255 voting rights absolute), and

TENDER OFFER FOR OUTSTANDING its holdings in instruments pursuant to § 25 (1) No. 2 WpHG as of

EULER HERMES SHARES 20 July 2017, amounting to 0.03 % (representing 130,720 voting rights On 15 January 2018, Allianz launched a simplified cash tender offer absolute). The total position notified on 25 July 2017 amounted to to acquire all outstanding Euler Hermes shares which expired on 6.93 %. 13 February 2018. As of 23 February 2018, the remaining float on the market represented less than 5 % of Euler Hermes share capital. In continuation with its initial tender offer, Allianz intends to launch a Declaration of Conformity with the German further simplified cash tender offer for all remaining Euler Hermes shares held by minority shareholders, which will be immediately Corporate Governance Code followed by a squeeze-out procedure and delisting of Euler Hermes On 14 December 2017, the Board of Management and the Supervi- shares from the Euronext Paris stock exchange. The consideration for sory Board of Allianz SE issued the Declaration of Conformity with the one Euler Hermes share will remain unchanged from the prior tender German Corporate Governance Code required by § 161 AktG and offer and will be € 122 in cash. For further details, please refer to made it permanently available on the company’s website at note 3 of the consolidated financial statements of the Allianz Group. www.allianz.com/corporate-governance.

SHARE BUY-BACK PROGRAM Beginning 2018, Allianz SE has started a new share buy-back pro- gram with a volume of up to € 2.0 bn. For further information, please refer to the section “Expected dividend development” of the chapter Outlook 2018 within the Group Management Report.

1_From 2018 onwards §§ 33 WpGH.

Annual Report 2017 – Allianz SE 75

C _ Financial Statements of Allianz SE

LIST OF PARTICIPATIONS OF ALLIANZ SE, MUNICH

AS OF 31 DECEMBER 2017 ACCORDING TO § 285 NO. 11 AND 11B HGB

IN CONJUNCTION WITH § 286 (3) NO. 1 HGB

Net Net Owned1 Equity Earnings Owned1 Equity Earnings % € thou € thou % € thou € thou APKV-Argos 74 Vermögensverwaltungsgesellschaft GERMAN ENTITIES mbH, Munich 100.0 2 12,297 1 Affiliates APKV-Argos 84 Vermögensverwaltungsgesellschaft mbH, Munich 100.0 2 66,136 - ACP Vermögensverwaltung GmbH & Co. KG Nr. 4a, Munich 100.0 5,711 (3) ARE Funds APKV GmbH, Munich 100.0 2 12,476 - ACP Vermögensverwaltung GmbH & Co. KG Nr. 4c, ARE Funds AZL GmbH, Munich 100.0 2 90,181 - Munich 100.0 22,737 17,777 ARE Funds AZV GmbH, Munich 100.0 2 5,994 3

ADEUS Aktienregister-Service-GmbH, Munich 79.6 8,714 1,173 Atropos Vermögensverwaltungsgesellschaft mbH, AGCS Infrastrukturfonds GmbH, Munich 100.0 2 7,393 - Munich 100.0 405,260 (1) AGCS-Argos 76 Vermögensverwaltungsgesellschaft AWP Service Deutschland GmbH, Aschheim 100.0 3 7,101 1,296 2 mbH, Munich 100.0 8,088 1 AZ-Arges Vermögensverwaltungsgesellschaft mbH, AGCS-Argos 86 Vermögensverwaltungsgesellschaft Munich 100.0 2 172,158 - 2 mbH, Munich 100.0 6,505 - AZ-GARI Vermögensverwaltungsgesellschaft mbH & Alida Grundstücksgesellschaft mbH & Co. KG, Hamburg 94.8 3 405,963 11,133 Co. KG, Munich 100.0 136,852 48,239 Allianz Argos 14 GmbH, Munich 100.0 2 5,069,081 - AZL AI Nr. 1 GmbH, Munich 100.0 2 8,778 - Allianz Asset Management GmbH, Munich 100.0 2 3,308,258 - AZL-Argos 73 Vermögensverwaltungsgesellschaft mbH, Munich 100.0 2 57,003 1 Allianz AZL Vermögensverwaltung GmbH & Co. KG, Munich 100.0 409,456 (62) AZL-Argos 83 Vermögensverwaltungsgesellschaft mbH, Munich 100.0 697,636 - Allianz Beratungs- und Vertriebs-AG, Munich 100.0 2 8,605 - AZ-SGD Classic Infrastrukturfonds GmbH, Munich 100.0 2 42,935 - Allianz Capital Partners Verwaltungs GmbH, Munich 100.0 37,416 26,466 AZ-SGD Direkt Infrastruktur GmbH, Munich 100.0 2 47,786 - Allianz Deutschland AG, Munich 100.0 2 8,074,341 - AZ-SGD Infrastrukturfonds GmbH, Munich 100.0 2 31,248 - Allianz Finanzbeteiligungs GmbH, Munich 100.0 2 824,678 - AZ-SGD Private Equity Fonds 2 GmbH, Munich 100.0 2 30,538 - Allianz Global Corporate & Specialty SE, Munich 100.0 3,2 1,144,236 - AZ-SGD Private Equity Fonds GmbH, Munich 100.0 2 524,890 - Allianz Global Investors GmbH, Frankfurt am Main 100.0 2 337,538 - AZV-Argos 72 Vermögensverwaltungsgesellschaft Allianz Handwerker Services GmbH, Aschheim 100.0 3 28,776 1,763 mbH, Munich 100.0 2 8,224 1 Allianz Investment Management SE, Munich 100.0 2 5,882 - AZV-Argos 82 Vermögensverwaltungsgesellschaft Allianz Leben Direkt Infrastruktur GmbH, Munich 100.0 2 182,185 - mbH, Munich 100.0 2 16,175 - Allianz Leben Infrastrukturfonds GmbH, Munich 100.0 2 341,147 - AZV-Argos 87 Vermögensverwaltungsgesellschaft mbH, Munich 100.0 2 88,500 - Allianz Leben Private Equity Fonds 1998 GmbH, Munich 100.0 2 32,893 - BrahmsQ Objekt GmbH & Co. KG, Stuttgart 94.8 3 89,400 3,540 Allianz Leben Private Equity Fonds 2001 GmbH, Munich 100.0 2 2,332,235 - Deutsche Lebensversicherungs-Aktiengesellschaft, Allianz Leben Private Equity Fonds 2008 GmbH, Munich 100.0 2 40,321 - Berlin 100.0 2 44,991 - Allianz Lebensversicherungs-Aktiengesellschaft, Euler Hermes Aktiengesellschaft, Hamburg 100.0 3 105,752 45,215 Stuttgart 100.0 2 1,442,771 166,000 Lola Vermögensverwaltungsgesellschaft mbH & Co. KG, Allianz of Asia-Pacific and Africa GmbH, Munich 100.0 727,527 (28) Munich 100.0 6,027 (23) Allianz Pension Direkt Infrastruktur GmbH, Munich 100.0 2 5,656 - manroland AG, Offenbach am Main 100.0 4,5 148,289 (179,129) Allianz Pensionsfonds Aktiengesellschaft, Stuttgart 100.0 56,086 2,001 manroland Vertrieb und Service GmbH, Mühlheim am Allianz Pensionskasse Aktiengesellschaft, Stuttgart 100.0 240,213 (23,108) Main 100.0 4,5 5,155 - Allianz Private Equity GmbH, Munich 100.0 2 31,323 - Münchener und Magdeburger Agrarversicherung 3,2 Allianz Private Krankenversicherungs- Aktiengesellschaft, Munich 100.0 7,686 17 Aktiengesellschaft, Munich 100.0 2 387,731 - Oldenburgische Landesbank Aktiengesellschaft, Oldenburg 90.2 3 649,349 35,219 Allianz Real Estate GmbH, Munich 100.0 3,2 21,237 - 2 Allianz Renewable Energy Subholding GmbH & Co. KG, PIMCO Deutschland GmbH, Munich 100.0 35,030 - Sehestedt 100.0 3 19,085 1,144 REC Frankfurt Objekt GmbH & Co. KG, Hamburg 80.0 303,583 10,442 Allianz Taunusanlage GbR, Stuttgart 99.5 3 177,437 5,508 Spherion Objekt GmbH & Co. KG, Stuttgart 100.0 3 76,156 3,150 Allianz Technology SE, Munich 100.0 3,2 253,496 - Volkswagen Autoversicherung AG, Braunschweig 100.0 2 108,517 - Allianz Versicherungs-Aktiengesellschaft, Munich 100.0 1,387,569 131 Volkswagen Autoversicherung Holding GmbH, Braunschweig 49.0 111,496 (3,906) AllSecur Deutschland AG, Munich 100.0 2 44,831 - 3 2 Windpark Aller-Leine-Tal GmbH & Co. KG, Sehestedt 100.0 22,821 777 APK Infrastrukturfonds GmbH, Munich 100.0 6,840 - 3 APK-Argos 85 Vermögensverwaltungsgesellschaft Windpark Berge-Kleeste GmbH & Co. KG, Sehestedt 100.0 11,216 1,164 mbH, Munich 100.0 2 9,673 - Windpark Büttel GmbH & Co. KG, Sehestedt 100.0 3 25,429 1,555 APKV Direkt Infrastruktur GmbH, Munich 100.0 2 50,477 - Windpark Calau GmbH & Co. KG, Sehestedt 100.0 3 49,455 1,650 APKV Infrastrukturfonds GmbH, Munich 100.0 2 45,986 - Windpark Cottbuser See GmbH & Co. KG, Sehestedt 100.0 3 14,055 1,130 APKV Private Equity Fonds GmbH, Munich 100.0 2 382,026 - Windpark Dahme GmbH & Co. KG, Sehestedt 100.0 3 34,035 3,481

76 Annual Report 2017 – Allianz SE

C _ Financial Statements of Allianz SE

Net Net Owned1 Equity Earnings Owned1 Equity Earnings % € thou € thou % € thou € thou Windpark Eckolstädt GmbH & Co. KG, Sehestedt 100.0 3 39,769 1,596 Allianz Asset Management U.S. Holding II LLC, Dover, DE 100.0 230,232 66,111 Windpark Freyenstein-Halenbeck GmbH & Co. KG, Sehestedt 100.0 3 22,037 1,270 Allianz Australia Insurance Limited, Sydney 100.0 1,697,895 212,861 Windpark Kesfeld-Heckhuscheid GmbH & Co. KG, Allianz Australia Life Insurance Limited, Sydney 100.0 3 51,132 7,762 Sehestedt 100.0 3 23,953 567 Allianz Australia Limited, Sydney 100.0 3 1,730,187 226,595 Windpark Kirf GmbH & Co. KG, Sehestedt 100.0 3 5,551 379 Allianz Ayudhya Assurance Public Company Limited, Windpark Kittlitz GmbH & Co. KG, Sehestedt 100.0 3 8,704 342 Bangkok 62.6 418,920 42,925 Windpark Pröttlin GmbH & Co. KG, Sehestedt 100.0 3 16,791 1,445 Allianz Bank Bulgaria AD, Sofia 99.9 3 111,005 15,469 Windpark Quitzow GmbH & Co. KG, Sehestedt 100.0 3 16,582 1,285 Allianz Bank Financial Advisors S.p.A., Milan 100.0 3 243,091 7,751 Windpark Redekin-Genthin GmbH & Co. KG, Sehestedt 100.0 3 26,900 1,691 Allianz Banque S.A., Puteaux 100.0 119,287 5,991 Windpark Schönwalde GmbH & Co. KG, Sehestedt 100.0 3 18,639 477 Allianz Benelux S.A., Brussels 100.0 732,129 80,865 Windpark Waltersdorf GmbH & Co. KG Renditefonds, Allianz Bulgaria Holding AD, Sofia 66.2 3 56,195 16,604 Sehestedt 100.0 3 10,889 414 Allianz C.P. General Insurance Co. Ltd., Bangkok 100.0 17,096 (3,773) Windpark Werder Zinndorf GmbH & Co. KG, Sehestedt 100.0 3 28,047 1,783 Allianz Cameroun Assurances SA, Douala 75.4 12,173 3,568

Allianz Carbon Investments B.V., Amsterdam 100.0 3 12,928 (122) Joint ventures Allianz Cash SAS, Paris la Défense 100.0 5,506 276 Dealis Fund Operations GmbH, Frankfurt am Main 50.0 32,011 13,424 Allianz Chicago Private Reit LP, Wilmington, DE 100.0 173,021 73 Allianz China General Insurance Company Ltd., Associates Guangzhou 100.0 51,841 3,071 Autobahn Tank & Rast Gruppe GmbH & Co. KG, Bonn 25.0 3 478,206 - Allianz China Life Insurance Co. Ltd., Shanghai 51.0 37,230 27,600 AV Packaging GmbH, Munich 51.0 17,396 (304) Allianz Colombia S.A., Bogotá D.C. 100.0 100,288 9,661 T&R Real Estate GmbH, Bonn 25.0 3 140,841 (26) Allianz Compañía de Seguros y Reaseguros S.A., Barcelona 99.9 3 956,836 146,485

Allianz Cornhill Information Services Private Ltd., Other participations below 20 % voting Trivandrum 100.0 3 19,181 4,869 rights Allianz Côte d'Ivoire Assurances SA, Abidjan 74.1 3 5,359 2,080 Bürgschaftsbank Bremen GmbH, Bremen 2.53 6,839 548 Allianz Côte d'Ivoire Assurances Vie SA, Abidjan 71.0 3 6,495 2,211 EURO Kartensysteme Gesellschaft mit beschränkter Haftung, Frankfurt am Main 1.53 11,635 173 Allianz Digital Corporate Ventures S.à r.l., Luxembourg 100.0 3 15,216 (72) EXTREMUS Versicherungs-Aktiengesellschaft, Cologne 16.03 64,740 300 Allianz do Brasil Participações Ltda., São Paulo 100.0 224,709 (15,921) FC Bayern München AG, Munich 8.33 454,574 20,580 Allianz Elementar Lebensversicherungs- Aktiengesellschaft, Vienna 100.0 207,158 6,113 GDV Dienstleistungs-GmbH, Hamburg 18.93 21,773 1,215 Allianz Elementar Versicherungs-Aktiengesellschaft, Mittelständische Beteiligungsgesellschaft Vienna 100.0 437,322 55,028 Niedersachsen (MBG) mbH, Hanover 5.53 13,131 899 Allianz EM Loans S.C.S., Luxembourg 100.0 3 43,812 426 MLP AG, Wiesloch 9.73 383,585 14,696 Allianz Engineering Inspection Services Limited, Niedersächsische Bürgschaftsbank (NBB) GmbH, Guildford 100.0 11,791 4,019 Hanover 2.83 24,464 1,273 Allianz Equity Investments Ltd., Guildford 100.0 169,469 3,712 Parkhaus am Waffenplatz GmbH, Oldenburg 3.43 5,968 502 Allianz Europe B.V., Amsterdam 100.0 3 45,713,477 1,297,755 paydirekt Beteiligungsgesellschaft privater Banken mbH, Unterföhring 2.03 6,683 550 Allianz Europe Ltd., Amsterdam 100.0 3 3,340,815 5,251 Protektor Lebensversicherungs-AG, Berlin 10.03 105,412 12,512 Allianz Finance II B.V., Amsterdam 100.0 3 18,758 3,202 Sana Kliniken AG, Ismaning 14.33 757,734 90,075 Allianz Finance II Luxembourg S.à r.l., Luxembourg 100.0 3 3,756,754 83,223 Allianz Finance IV Luxembourg S.à r.l., Luxembourg 100.0 3 44,098 (12,467) Allianz Finance VII Luxembourg S.A., Luxembourg 100.0 3 1,120,680 6,230 FOREIGN ENTITIES Allianz Finance VIII Luxembourg S.A., Luxembourg 100.0 3 339,732 (60) Affiliates Allianz Fire and Marine Insurance Japan Ltd., Tokyo 100.0 3 29,842 4,403 490 Lower Unit LP, Wilmington, DE 100.0 127,635 3,750 Allianz France Investissement OPCI, Paris la Défense 100.0 138,400 5,349 Aero-Fonte S.r.l., Catania 100.0 3 12,527 4,216 Allianz France Real Estate Invest SPPICAV, Paris la AGA Assistance Beijing Services Co. Ltd., Beijing 100.0 3 17,837 12,743 Défense 100.0 3 1,735,439 54,253 AGA Service Company Corp., Richmond, VA 100.0 3 15,487 12,823 Allianz France Richelieu 1 S.A.S., Paris la Défense 100.0 465,792 (2,339) AGCS International Holding B.V., Amsterdam 100.0 3 1,331,683 (119) Allianz France S.A., Paris la Défense 100.0 6,217,889 770,988 AGCS Marine Insurance Company, Chicago, IL 100.0 163,672 8,826 Allianz France US REIT LP, Wilmington, DE 100.0 111,266 1,142 AGCS Resseguros Brasil S.A., São Paulo 100.0 3 65,174 466 Allianz Fund Investments Inc., Wilmington, DE 100.0 3 284,569 9,240 AGF Holdings (UK) Limited, Guildford 100.0 98,469 2,067 Allianz General Insurance Company (Malaysia) Berhad p.l.c., Kuala Lumpur 100.0 392,421 41,509 AGF Inversiones S.A., Buenos Aires 100.0 2 9,655 (27) Allianz Global Corporate & Specialty do Brasil Allianz (UK) Limited, Guildford 100.0 1,025,798 65 Participações Ltda., Rio de Janeiro 100.0 3 224,758 - Allianz Africa S.A., Paris la Défense 100.0 3 46,400 3,970 Allianz Global Corporate & Specialty of Africa Allianz Alapkezelõ Zrt., Budapest 100.0 7,163 3,652 (Proprietary) Ltd., Johannesburg 100.0 3 7,824 347 Allianz Argentina Compañía de Seguros Generales S.A., Allianz Global Corporate & Specialty South Africa Ltd., Buenos Aires 100.0 113,372 62,697 Johannesburg 100.0 3 7,822 344 Allianz Argentina RE S.A., Buenos Aires 100.0 21,927 13,817 Allianz Global Investors Asia Pacific Ltd., Hong Kong 100.0 32,326 9,199 Allianz Asset Management of America L.P., Dover, DE 100.0 687,910 1,370,379 Allianz Global Investors Distributors LLC, Dover, DE 100.0 31,024 3,657 Allianz Asset Management of America LLC, Dover, DE 100.0 5,953,166 1,676,851 Allianz Global Investors Japan Co. Ltd., Tokyo 100.0 13,514 4,773

Annual Report 2017 – Allianz SE 77

C _ Financial Statements of Allianz SE

Net Net Owned1 Equity Earnings Owned1 Equity Earnings % € thou € thou % € thou € thou Allianz Global Investors Singapore Ltd., Singapore 100.0 12,787 1,463 Allianz Nederland Levensverzekering N.V., Rotterdam 100.0 252,856 29,404 Allianz Global Investors Taiwan Ltd., Taipei 100.0 31,296 14,324 Allianz New Europe Holding GmbH, Vienna 100.0 833,247 176,077 Allianz Global Investors U.S. Holdings LLC, Dover, DE 100.0 105,263 98,832 Allianz New Zealand Limited, Auckland 100.0 3 36,154 1,536 Allianz Global Investors U.S. LLC, Dover, DE 100.0 70,811 141,371 Allianz of America Inc., Wilmington, DE 100.0 13,000,580 2,118,491 Allianz Global Life dac, Dublin 100.03 121,101 4,787 Allianz p.l.c., Dublin 100.0 375,422 33,435 Allianz Global Risks US Insurance Company Corp., Allianz Partners S.A.S., Saint-Ouen 100.0 3 369,015 3,772 Chicago, IL 100.0 3 1,831,570 (254,634) Allianz Pensionskasse Aktiengesellschaft, Vienna 100.0 11,610 386 Allianz Hayat ve Emeklilik A.S., Istanbul 89.0 18,906 4,880 Allianz penzijní spolecnost a.s., Prague 100.0 3 32,294 2,671 Allianz Hellas Insurance Company S.A., Athens 100.0 137,362 2,423 Allianz PNB Life Insurance Inc., Makati City 51.0 30,666 2,514 Allianz Hold Co Real Estate S.à r.l., Luxembourg 100.0 3 374,646 13,018 Allianz pojistovna a.s., Prague 100.03 166,533 27,571 Allianz Holding eins GmbH, Vienna 100.0 2,315,797 263,437 Allianz Polska Services Sp. z o.o., Warsaw 100.03 16,641 3,709 Allianz Holding France SAS, Paris la Défense 100.0 9,350,681 2,883,884 Allianz Popular Asset Management SGIIC S.A., Madrid 100.0 6,065 21,620 Allianz Holdings p.l.c., Dublin 100.0 3 61,516 - Allianz Popular Pensiones EGFP S.A., Madrid 100.0 19,954 21,618 Allianz Holdings plc, Guildford 100.0 1,666,889 52,718 Allianz Popular S.L., Madrid 60.0 1,010,719 7,761 Allianz Hungária Biztosító Zrt., Budapest 100.0 110,940 61,285 Allianz Popular Vida Compañía de Seguros y Allianz HY Investor LP, Wilmington, DE 100.0 3 428,065 (1,492) Reaseguros S.A., Madrid 100.0 106,320 64,626 Allianz IARD S.A., Paris la Défense 100.0 2,097,839 317,523 Allianz Presse US REIT LP, Wilmington, DE 100.0 37,677 (29) Allianz Individual Insurance Group LLC, Minneapolis, MN 100.0 3 243,793 (4,538) Allianz Properties Limited, Guildford 100.0 169,550 14,643 Allianz Infrastructure Czech HoldCo I S.à r.l., Allianz Re Dublin dac, Dublin 100.03 731,869 191,186 Luxembourg 100.0 3 166,012 81,821 Allianz Renewable Energy Partners I LP, London 100.0 181,404 914 Allianz Infrastructure Czech HoldCo II S.à r.l., Allianz Renewable Energy Partners II Limited, London 100.0 191,456 (64,079) Luxembourg 100.0 3 165,942 81,906 Allianz Renewable Energy Partners III LP, London 98.8 149,927 2,952 Allianz Infrastructure Luxembourg Holdco I S.A., Luxembourg 100.0 3 1,111,893 20,786 Allianz Renewable Energy Partners IV Limited, London 98.8 715,671 (41,186) Allianz Infrastructure Luxembourg Holdco II S.A., Allianz Renewable Energy Partners of America LLC, Luxembourg 100.0 3 232,207 4,307 Wilmington, DE 100.0 751,677 113,939 Allianz Infrastructure Luxembourg I S.à r.l., Luxembourg 100.0 3 1,681,393 187,804 Allianz Renewable Energy Partners V plc., London 100.0 692,912 18,031 Allianz Infrastructure Norway Holdco I S.à r.l., Allianz Renewable Energy Partners VI Limited, London 100.0 585,142 (7,984) Luxembourg 100.0 3 124,882 499 Allianz Renewable Energy Partners VIII Limited, London 100.0 221,803 (4,108) Allianz Infrastructure Spain Holdco I S.à r.l., Allianz Risk Transfer (Bermuda) Ltd., Hamilton 100.03 53,597 928 Luxembourg 100.0 3 53,601 (3) Allianz Risk Transfer Inc., New York, NY 100.03 57,754 (4,454) Allianz Infrastructure Spain Holdco II S.à r.l., Luxembourg 100.0 3 12,313 9,606 Allianz S.p.A., Trieste 100.0 2,549,878 684,203 Allianz Insurance Company-Egypt S.A.E., New Cairo 95.0 3 7,136 (94) Allianz Saúde S.A., São Paulo 100.0 51,997 (24,085) Allianz Insurance Lanka Limited, Colombo 100.0 8,634 702 Allianz Seguros de Vida S.A., Bogotá D.C. 100.0 59,469 6,564 Allianz Insurance plc, Guildford 100.0 1,353,479 99,930 Allianz Seguros S.A., São Paulo 100.0 220,914 (14,157) Allianz Inversiones S.A., Bogotá D.C. 100.0 5,865 3,060 Allianz Seguros S.A., Bogotá D.C. 100.0 46,224 3,139 Allianz Invest Kapitalanlagegesellschaft mbH, Vienna 100.0 7,090 1,541 Allianz Services (UK) Limited, London 100.0 6,312 (92) Allianz Investment Management LLC, Minneapolis, MN 100.0 3 7,633 55,825 Allianz Sigorta A.S., Istanbul 96.2 371,859 139,245 Allianz Investmentbank Aktiengesellschaft, Vienna 100.0 35,152 5,638 Allianz SNA s.a.l., Beirut 100.03 56,104 6,731 Allianz Investments III Luxembourg S.A., Luxembourg 100.0 3 649,588 (10,496) Allianz Société Financière S.à r.l., Luxembourg 100.03 1,490,395 43,402 Allianz Leasing Bulgaria AD, Sofia 51.0 3 5,731 1,050 Allianz South America Holding B.V., Amsterdam 100.03 424,170 (52,288) Allianz Life (Bermuda) Ltd., Hamilton 100.0 3 8,244 1,574 Allianz Subalpina Holding S.p.A., Turin 98.1 5,545 106 Allianz Life Assurance Company-Egypt S.A.E., New Allianz Suisse Lebensversicherungs-Gesellschaft AG, Cairo 100.0 3 28,952 10,289 Wallisellen 100.0 857,608 72,844 Allianz Life Financial Services LLC, Minneapolis, MN 100.0 3 35,760 (85) Allianz Suisse Versicherungs-Gesellschaft AG, Wallisellen 100.0 571,797 305,371 Allianz Life Insurance Company Ltd., Moscow 100.0 3 53,304 18,037 Allianz Taiwan Life Insurance Co. Ltd., Taipei 99.7 259,986 (17,816) Allianz Life Insurance Company of Missouri, Clayton, MO 100.0 3 291,581 (3,697) Allianz Technology (Thailand) Co.,Ltd, Bangkok 100.03 5,279 2,188 Allianz Life Insurance Company of New York, New York, NY 100.0 3 155,605 12,742 Allianz Technology AG, Wallisellen 100.0 17,908 3,496 Allianz Life Insurance Company of North America, Allianz Technology GmbH, Vienna 100.0 19,984 1,198 3 Minneapolis, MN 100.0 7,120,651 669,690 Allianz Technology International B.V., Amsterdam 100.03 35,509 (14)

Allianz Life Insurance Japan Ltd., Tokyo 100.0 6,284 (2,089) Allianz Technology of America Inc., Wilmington, DE 100.03 16,838 (1,139) Allianz Life Insurance Malaysia Berhad p.l.c., Kuala Allianz Technology S.C.p.A., Milan 100.0 15,814 11 Lumpur 100.0 185,823 19,748 Allianz Technology S.L., Barcelona 100.03 78,236 (2,716) Allianz Life Luxembourg S.A., Luxembourg 100.0 74,750 9,867 Allianz Technology SAS, Paris 100.03 41,928 1,408 Allianz Malaysia Berhad p.l.c., Kuala Lumpur 75.0 216,306 15,752 Allianz Tiriac Asigurari SA, Bucharest 52.2 178,903 35,358 Allianz Marine (UK) Ltd., Ipswich 100.0 3 11,138 68 Allianz Tiriac Pensii Private Societate de administrare a Allianz Maroc S.A., Casablanca 98.9 3 89,813 10,193 fondurilor de pensii private S.A., Bucharest 100.0 17,588 20,256 3 Allianz Mena Holding Bermuda Ltd., Beirut 99.9 26,488 8,887 Allianz Underwriters Insurance Company Corp., Allianz México S.A. Compañía de Seguros, Mexico City 100.0 134,628 60,172 Burbank, CA 100.0 61,243 1,632 Allianz Nederland Groep N.V., Rotterdam 100.0 278,686 25,517 Allianz US Investment LP, Wilmington, DE 100.0 1,215,143 5,854

78 Annual Report 2017 – Allianz SE

C _ Financial Statements of Allianz SE

Net Net Owned1 Equity Earnings Owned1 Equity Earnings % € thou € thou % € thou € thou Allianz US Private REIT LP, Wilmington, DE 100.0 1,252,871 6,742 Climmolux Holding SA, Luxembourg 100.0 75,943 1,470 Allianz Vie S.A., Paris la Défense 100.0 2,586,328 272,337 Club Marine Limited, Sydney 100.03 5,605 807 Allianz Vorsorgekasse AG, Vienna 100.0 25,647 5,797 Companhia de Seguros Allianz Portugal S.A., Lisbon 64.8 178,961 6,375 Allianz Yasam ve Emeklilik A.S., Istanbul 80.0 104,433 51,704 CPRN Thailand Ltd., Bangkok 100.0 70,979 18,947 Allianz Zagreb d.d., Zagreb 83.23 123,149 10,405 CreditRas Assicurazioni S.p.A., Milan 50.0 88,990 4,083 Allianz ZB d.o.o. Company for the Management of CreditRas Vita S.p.A., Milan 50.0 508,238 47,536 Obligatory Pension Funds, Zagreb 51.0 22,600 10,484 Darta Saving Life Assurance Ltd., Dublin 100.0 303,641 58,323 Allianz-Slovenská DSS a.s., Bratislava 100.03 45,863 5,275 Deeside Investments Inc., Wilmington, DE 50.1 65,349 22,425 Allianz-Slovenská poist'ovna a.s., Bratislava 99.6 302,762 71,672 Delta Technical Services Ltd., London 100.03 10,940 1,381 American Automobile Insurance Company Corp., Earth Diamond Point a.s., Prague 100.0 12,444 755 City, MO 100.0 64,981 675 Dresdner Kleinwort Pfandbriefe Investments II Inc., American Financial Marketing Inc., Minneapolis, MN 100.03 35,269 2,663 Minneapolis, MN 100.03 664,150 10,807 Ann Arbor Annuity Exchange Inc., Ann Arbor, MI 100.03 15,072 1,574 Eolica Erchie S.r.l., Lecce 100.03 6,869 1,168 APK US Investment LP, Wilmington, DE 100.0 80,478 275 Euler Hermes Acmar SA, Casablanca 55.03 7,080 937 APKV US Private REIT LP, Wilmington, DE 100.0 209,884 2,217 Euler Hermes Collections Sp. z o.o., Warsaw 100.03 12,887 2,342 Arges Investments I N.V., Amsterdam 100.03 142,178 (678) Euler Hermes Crédit France S.A.S., Paris la Défense 100.03 164,095 6,473 Arges Investments II N.V., Amsterdam 100.03 138,975 383 Euler Hermes Group SA, Paris la Défense 79.13 1,700,869 777,887 Asit Services S.R.L., Bucharest 100.0 29,209 1,920 Euler Hermes Luxembourg Holding S.à r.l., Luxembourg 100.03 109,599 (34) Assistance Courtage d'Assurance et de Réassurance Euler Hermes North America Holding Inc., Owings Mills, S.A., Courbevoie 100.0 5,447 4,792 MD 100.0 165,436 1,787 Associated Indemnity Corporation, Los Angeles, CA 100.0 74,965 601 Euler Hermes North America Insurance Company Inc.,

Assurances Médicales SA, Metz 100.0 5,597 4,091 Owings Mills, MD 100.0 177,333 21,513 3 AWP Assistance (India) Private Limited, Gurgaon 100.0 9,362 1,002 Euler Hermes Patrimonia SA, Brussels 100.03 243,084 (1,040) 3 AWP Assistance UK Ltd., London 100.0 9,911 5,692 Euler Hermes Ré SA, Luxembourg 100.03 61,055 - 3 AWP Australia Holdings Pty Ltd., Toowong 100.0 7,552 5,968 Euler Hermes Real Estate SPPICAV, Paris la Défense 60.03 202,200 (2,190) AWP Australia Pty Ltd., Toowong 100.03 15,013 1,492 Euler Hermes Recouvrement France S.A.S., Paris la 3 AWP France SAS, Saint-Ouen 95.03 26,376 42,405 Défense 100.0 13,664 8,092 3 AWP Health & Life S.A., Saint-Ouen 100.03 410,088 37,842 Euler Hermes Reinsurance AG, Wallisellen 100.0 866,609 137,748 3 AWP MEA Holdings Co. W.L.L., Manama 75.03 15,612 (2,336) Euler Hermes S.A., Brussels 100.0 761,784 148,491 3 AWP P&C S.A., Saint-Ouen 100.03 308,014 23,596 Euler Hermes Seguros de Crédito S.A., São Paulo 100.0 6,975 183 3 AWP Service Brasil Ltda., São Bernardo do Campo 100.03 36,552 41 Euler Hermes Service AB, Stockholm 100.0 8,655 7,265 3 AWP Services NL B.V., Amsterdam 100.03 13,081 1,559 Euler Hermes Services Italia S.r.l., Rome 100.0 10,247 9,747 AWP USA Inc., Richmond, VA 100.03 15,088 13,989 Euler Hermes Services North America LLC, Owings Mills, MD 100.0 6,494 5,044 AZ Euro Investments II S.à r.l., Luxembourg 100.03 270,063 2,726 Euler Hermes Services Schweiz AG, Wallisellen 100.03 7,308 2,922 AZ Euro Investments S.à r.l., Luxembourg 100.03 3,390,188 204,864 Euler Hermes Serviços de Gestão de Riscos Ltda., São 3 AZ Jupiter 10 B.V., Amsterdam 100.0 148,311 1,104 Paulo 100.03 7,974 (237) 3 AZ Jupiter 4 B.V., Amsterdam 100.0 7,885 (14) Euler Hermes Sigorta A.S., Istanbul 100.03 5,374 (198) 3 AZ Jupiter 8 B.V., Amsterdam 100.0 3,265,428 (189) Euler Hermes Singapore Services Pte. Ltd., Singapore 100.0 5,163 2,056 3 AZ Jupiter 9 B.V., Amsterdam 100.0 343,300 4,385 Euler Hermes South Express S.A., Brussels 100.03 36,134 626

AZ Vers US Private REIT LP, Wilmington, DE 100.0 82,959 971 Euler Hermes World Agency SASU, Paris la Défense 100.03 8,172 822 3 AZGA Service Canada Inc., Kitchener, ON 55.0 20,984 6,183 Eurl 20/22 Le Peletier, Paris la Défense 100.0 52,242 1,740 3 AZL PF Investments Inc., Minneapolis, MN 100.0 580,680 - Eurosol Invest S.r.l., Udine 100.03 9,187 557

AZOA Services Corporation, New York, NY 100.0 11,488 (32) Fénix Directo Compañía de Seguros y Reaseguros S.A.,

Beleggingsmaatschappij Willemsbruggen B.V., Rotterdam 100.03 86,610 2,132 Madrid 100.0 40,830 (4,476) Beykoz Gayrimenkul Yatirim Insaat Turizm Sanayi ve Fireman's Fund Indemnity Corporation, Liberty Corner, NJ 100.0 12,445 (172)

Ticaret A.S., Ankara 100.0 121,508 8,645 Fireman's Fund Insurance Company Corp., Los Angeles, Botanic Building SPRL, Brussels 100.03 48,443 2,395 CA 100.0 1,155,384 87,761 British Reserve Insurance Co. Ltd., Guildford 100.0 10,348 44 Fireman's Fund Insurance Company of Hawaii Inc., Honolulu, HI 100.0 7,618 (109) Calobra Investments Sp. z o.o., Warsaw 100.0 139,809 (10,068) Fragonard Assurance S.A., Paris 100.03 84,425 26,738 Calypso S.A., Paris la Défense 100.0 71,611 7,912 Fu An Management Consulting Co. Ltd., Beijing 1.03 6,568 (49) CAP Rechtsschutz-Versicherungsgesellschaft AG, Wallisellen 100.0 20,407 786 Fusion Company Inc., Richmond, VA 100.03 5,086 234 Caroline Berlin S.C.S., Luxembourg 93.2 189,734 3,194 GamePlan Financial Marketing LLC, Woodstock, GA 100.03 126,136 770 Central Shopping Center a.s., Bratislava 100.0 60,655 2,350 Generation Vie S.A., Courbevoie 52.5 68,372 2,920 CEPE de la Forterre S.à r.l., Versailles 100.03 8,110 (2,496) Genialloyd S.p.A., Milan 100.0 349,727 683,989 CEPE de Sambres S.à r.l., Versailles 100.03 15,368 (6,248) Havelaar & van Stolk B.V., Rotterdam 100.0 5,527 (330) CEPE des Portes de la Côte d'Or S.à r.l., Versailles 100.03 9,972 (4,893) Home & Legacy Insurance Services Limited, Guildford 100.0 19,254 2,728 CEPE du Bois de la Serre S.à r.l., Versailles 100.03 6,733 (3,743) Immovalor Gestion S.A., Paris la Défense 100.0 6,987 3,055 Chicago Insurance Company Corp., Chicago, IL 100.0 55,379 (213) ImWind GHW GmbH & Co. KG, Pottenbrunn 100.03 5,652 (997) CIC Allianz Insurance Ltd., Sydney 100.03 35,461 6,458 Insurance CJSC “Medexpress”, Saint Petersburg 100.03 8,186 1,793

Annual Report 2017 – Allianz SE 79

C _ Financial Statements of Allianz SE

Net Net Owned1 Equity Earnings Owned1 Equity Earnings % € thou € thou % € thou € thou Interstate Fire & Casualty Company, Chicago, IL 100.0 58,363 (328) SAS Madeleine Opéra, Paris la Défense 100.0 646,165 28,351 Investitori SGR S.p.A., Milan 100.0 19,824 8,506 SAS Passage des princes, Paris la Défense 100.0 196,256 2,462 Järvsö Sörby Vindkraft AB, Danderyd 100.03 23,901 (4,641) Sättravallen Wind Power AB, Strömstad 100.03 10,142 (899) Jefferson Insurance Company Corp., New York, NY 100.03 67,732 8,020 SC Tour Michelet, Paris la Défense 100.0 54,100 1,368 Joukhaisselän Tuulipuisto Oy, Oulu 100.03 19,774 (5,491) SCI 46 Desmoulins, Paris la Défense 100.0 112,885 4,086 Jouttikallio Wind Oy, Kotka 100.03 9,699 25 SCI Allianz ARC de Seine, Paris la Défense 100.0 213,497 6,996 JSC Insurance Company Allianz, Moscow 100.03 113,671 31,067 SCI Allianz Chateaudun, Paris la Défense 100.0 116,913 1,843 Kensington Fund, Milan 100.0 148,103 49,633 SCI Allianz Invest Pierre, Paris la Défense 100.0 289,987 1,323 Kiinteistöosakeyhtiö Eteläesplanadi 2 Oy, Helsinki 100.0 33,991 1,611 SCI Allianz Messine, Paris la Défense 100.0 227,875 3,766 Kuolavaara-Keulakkopään Tuulipuisto Oy, Oulu 100.03 23,778 (8,434) SCI Allianz Value Pierre, Paris la Défense 49.3 30,387 (64) LAD Energy GmbH & Co. KG, Pottenbrunn 100.03 7,767 (145) SCI AVIP SCPI Selection, Courbevoie 100.0 46,175 11,451 LLC “IC Euler Hermes Ru”, Moscow 100.03 6,761 211 SCI ESQ, Paris la Défense 75.0 106,183 2,918 Lloyd Adriatico Holding S.p.A., Trieste 99.9 21,987 - SCI Via Pierre 1, Paris la Défense 100.0 253,132 11,314 Maevaara Vind 2 AB, Stockholm 100.03 12,322 (252) SCI Volnay, Paris la Défense 100.0 173,512 2,677 National Surety Corporation, Chicago, IL 100.0 61,464 (141) SDIII Energy GmbH & Co. KG, Pottenbrunn 100.03 6,645 649 NEXtCARE Claims Management LLC, Dubai 100.03 13,523 4,150 Silex Gas Norway AS, Oslo 100.03 77,408 4,136 OPCI Allianz France Angel, Paris la Défense 100.0 125,935 4,261 Sirius S.A., Luxembourg 94.8 320,277 6,273 Orione PV S.r.l., Milan 100.03 8,847 516 Società Agricola San Felice S.p.A., Milan 100.0 36,390 178 Orsa Maggiore PV S.r.l., Milan 100.03 18,178 1,642 Société Foncière Européenne B.V., Amsterdam 100.03 1,207,366 1,545 Pacific Investment Management Company LLC, Dover, DE 95.7 523,674 1,732,566 Société Nationale Foncière S.A.L., Beirut 66.03 14,119 304 Parc Eolien de Chaourse SAS, Versailles 100.03 7,239 (1,175) Sofiholding S.A., Brussels 100.0 17,564 358 Parc Eolien de Fontfroide SAS, Versailles 100.03 5,259 (398) South City Office Broodthaers SA, Brussels 100.0 52,957 2,110 Parc Eolien de la Sole du Bois SAS, Paris 100.03 5,490 1,189 TFI Allianz Polska S.A., Warsaw 100.03 6,877 1,829 Pet Plan Ltd., Guildford 100.0 109,219 43 The American Insurance Company Corp., Cincinnati, OH 100.0 55,524 (756) PFP Holdings Inc., Dover, DE 100.0 232,904 6,168 The Annuity Store Financial & Insurance Services LLC, 3 Sacramento, CA 100.0 22,230 108 PGA Global Services LLC, Dover, DE 100.0 8,374 5,463

PIMCO (Schweiz) GmbH, Zurich 100.0 8,184 3,404 Three Pillars Business Solutions Limited, Guildford 100.0 5,272 (11)

Top Immo A GmbH & Co. KG, Vienna 100.0 5,897 600 PIMCO Asia Ltd., Hong Kong 100.0 19,792 614

PIMCO Asia Pte Ltd., Singapore 100.0 17,778 2,629 Top Immo Besitzgesellschaft B GmbH & Co. KG, Vienna 100.0 8,890 1,034

Top Versicherungsservice GmbH, Vienna 100.0 17,801 (1,585) PIMCO Australia Pty Ltd., Sydney 100.0 32,870 16,749 3 PIMCO Canada Corp., Toronto, ON 100.0 21,766 17,242 Towarzystwo Ubezpieczen Euler Hermes S.A., Warsaw 100.0 19,693 1,245

Trafalgar Insurance Public Limited Company, Guildford 100.0 43,986 330 PIMCO Europe Ltd., London 100.0 184,152 134,496

PIMCO Global Advisors (Ireland) Ltd., Dublin 100.0 22,775 9,943 TU Allianz Polska S.A., Warsaw 100.0 249,279 29,156

TU Allianz Zycie Polska S.A., Warsaw 100.0 103,567 12,990 PIMCO Global Advisors LLC, Dover, DE 100.0 373,224 241,528

PIMCO Global Holdings LLC, Dover, DE 100.0 31,772 20,622 VertBois S.à r.l., Luxembourg 100.0 20,049 849

Vordere Zollamtsstraße 13 GmbH, Vienna 100.0 76,928 100,121 PIMCO Investments LLC, Dover, DE 100.0 80,807 260,575

PIMCO Japan Ltd., Road Town 100.0 33,927 29,088 WFC Investments Sp. z o.o., Warsaw 87.5 230,440 (6,479)

3 Windpark GHW GmbH, Pottenbrunn 100.0 7,456 (184) POD Allianz Bulgaria AD, Sofia 65.9 24,612 9,460 3 Primacy Underwriting Management Pty Ltd., Melbourne 100.03 6,338 2,090 Windpark Ladendorf GmbH, Vienna 100.0 8,382 (286) 3 Windpark Zistersdorf GmbH, Pottenbrunn 100.0 7,959 (590) Protexia France S.A., Paris la Défense 100.0 35,471 8,472 3 PT Asuransi Allianz Life Indonesia p.l.c., Jakarta 99.8 370,147 19,463 Yorktown Financial Companies Inc., Minneapolis, MN 100.0 155,673 1 3 ZAD Allianz Bulgaria, Sofia 87.4 33,462 4,185 PTE Allianz Polska S.A., Warsaw 100.0 49,265 4,818 3 Q207 S.C.S., Luxembourg 94.0 87,373 3,378 ZAD Allianz Bulgaria Zhivot, Sofia 99.0 31,488 3,219 3 3 ZAD Energia, Sofia 51.0 22,035 8,882 Questar Capital Corporation, Minneapolis, MN 100.0 14,892 (7,174) 3 Real Faubourg Haussmann SAS, Paris la Défense 100.03 72,373 227 ZiOst Energy GmbH & Co. KG, Pottenbrunn 100.0 11,155 1,390 Real FR Haussmann SAS, Paris la Défense 100.03 63,774 746 Redoma S.à r.l., Luxembourg 100.03 23,488 (42) Joint ventures SA Carène Assurance, Paris 100.0 14,233 698 114 Venture LP, Wilmington, DE 49.53 198,160 5,800 SA Vignobles de Larose, Saint-Laurent-Médoc 100.0 36,464 (47) A&A Centri Commerciali S.r.l., Milan 50.03 167,225 5,011 Saarenkylä Tuulipuisto Oy, Oulu 100.03 10,753 (4,541) Allee-Center Kft., Budapest 50.03 109,207 9,955 San Francisco Reinsurance Company, Los Angeles, CA 100.0 495,356 (16,839) AMLI-Allianz Investment LP, Wilmington, DE 75.0 87,534 2,688 SAS 20 pompidou, Paris la Défense 100.0 115,681 4,380 AS Gasinfrastruktur Beteiligung GmbH, Vienna 60.03 338,770 (11) SAS Allianz Etoile, Paris la Défense 100.0 112,673 4,421 AZ/JH Co-Investment Venture (DC) LP, Wilmington, DE 80.03 269,063 8,647 SAS Allianz Forum Seine, Paris la Défense 100.0 242,292 6,733 AZ/JH Co-Investment Venture (IL) LP, Wilmington, DE 80.03 246,158 5,140 SAS Allianz Logistique, Paris la Défense 100.0 606,956 8,635 Companhia de Seguro de Créditos S.A., Lisbon 50.03 65,040 8,454 SAS Allianz Platine, Paris la Défense 100.0 274,242 16,677 Dundrum Car Park Limited Partnership, Dublin 50.03 40,942 6,252 SAS Allianz Rivoli, Paris la Défense 100.0 101,538 3,915 Dundrum Retail Limited Partnership, Dublin 50.03 1,740,524 152,081 SAS Allianz Serbie, Paris la Défense 100.0 340,819 11,879 Euromarkt Center d.o.o., Ljubljana 50.03 28,584 8,796 Fiumaranuova S.r.l., Genoa 50.13 153,952 4,698 SAS Angel Shopping Centre, Paris la Défense 90.0 296,018 2,894

80 Annual Report 2017 – Allianz SE

C _ Financial Statements of Allianz SE

Net Net Owned1 Equity Earnings Owned1 Equity Earnings % € thou € thou % € thou € thou

Guotai Jun'an Allianz Fund Management Co. Ltd., Other participations below 20 % voting Shanghai 49.03 96,765 18,239 rights Israel Credit Insurance Company Ltd., Tel Aviv 50.03 46,312 6,130 Agrupación Española de Entidades Aseguradoras de los Seguros Agrarios Combinados S.A., Madrid 5.23 12,947 588 Italian Shopping Centre Investment S.r.l., Milan 50.03 21,198 (3,925) Al-Nisr Al-Arabi Insurance Company, Amman 18.03 27,776 3,384 LBA IV-PPI Venture LLC, Dover, DE 45.03 335,142 2,369 ALTRO Invest S.C.A., Weiswampach 19.9 5,356 (15) LBA IV-PPII-Office Venture LLC, Dover, DE 45.03 29,944 471 Autostrade per l’Italia S.p.A., Rome 6.93 6,117,662 930,375 LBA IV-PPII-Retail Venture LLC, Dover, DE 45.03 44,395 163 Banco BPI S.A., Porto 8.53 2,440,477 313,230 NET4GAS Holdings s.r.o., Prague 50.03 105,401 64,877 Catch a Car AG, Luzern 19.53 14,885 869 NRF (Finland) AB, Västeras 50.03 129,695 26,176 China Pacific Insurance (Group) Co. Ltd., Shanghai 3.33 18,385,255 1,675,864 Porterbrook Holdings I Limited, London 30.03 1,326,430 17,328 Cofinimmo S.A., Brussels 2.4 1,852,935 96,627 Queenspoint S.L., Madrid 50.03 108,273 3,368 Commercial Bank of Cameroon LC, Douala 10.03 20,122 2,136 SC Holding SAS, Paris 50.03 10,603 967 ESL Partners L.P., Wilmington, DE 1.53 1,708,651 12,629 SES Shopping Center AT1 GmbH, Salzburg 50.03 220,016 9,892 Formula E Holdings Limited, Hong Kong 3.73 5,882 (2,152) SES Shopping Center FP 1 GmbH, Salzburg 50.03 104,911 2,806 Geodis SACS, Levallois-Perret 5.03 1,110,500 274,900 Solunion Compañía Internacional de Seguros y Reaseguros SA, Madrid 50.03 105,103 8,281 IDI SCA, Paris 5.43 203,801 3,876 The State-Whitehall Company LP, Dover, DE 49.93 5,893 (3,688) IPUT plc, Dublin 14.53 1,988,842 80,542 TopTorony Ingatlanhasznosító Zrt., Budapest 50.03 10,453 (1,658) Lemonade Inc., New York, NY 4.83 48,470 (4,105) VGP European Logistics S.à r.l., Senningerberg 50.03 156,960 (674) Logistis Luxembourg Feeder S.A., Luxembourg 7.6 76,816 23,737 Waterford Blue Lagoon LP, Wilmington, DE 49.03 383,677 2,116 Logistis Luxembourg S.A., Luxembourg 5.83 203,567 2,455 Logistis SPPICAV, Paris 5.83 750,354 33,540 Associates Meiji Yasuda Asset Management Company Ltd., Tokyo 6.7 69,185 4,498 Allianz EFU Health Insurance Ltd., Karachi 49.03 5,732 1,191 MFM Holding Ltd., London 8.83 9,434 (9,393) Allianz Saudi Fransi Cooperative Insurance Company, Nauto Inc., Paolo Alto, CA 1.93 5,276 (983) Riyadh 32.53 57,138 685 Oddo et Cie SCA, Paris 2.23 814,000 65,327 Archstone Multifamily Partners AC JV LP, Wilmington, PARIS-ORLEANS, Paris 2.53 2,300,530 186,000 DE 40.03 85,977 (649) PERILS AG, Zürich 10.03 8,565 1,002 Archstone Multifamily Partners AC LP, Wilmington, DE 28.63 165,272 (59,672) Portima SCRL, Bruxelles 10.9 12,092 2,416 Areim Fastigheter 2 AB, Stockholm 23.33 83,949 (170) Société d'Assurances de Consolidation des Retraites de Areim Fastigheter 3 AB, Stockholm 26.23 36,926 (3,310) l'Assurance S.A., Paris 20.83 230,428 (22,678) Bajaj Allianz General Insurance Company Ltd., Pune 26.03 493,760 101,673 Société Générale de Banque au Cameroun LC, Douala 16.33 77,353 14,824 Bajaj Allianz Life Insurance Company Ltd., Pune 26.03 1,183,961 116,819 Société Générale de Banques en Côte d'Ivoire S.A., Bazalgette Equity Ltd., London 34.33 162,020 - Abidjan 7.33 25,916 41,204 Brunei National Insurance Company Berhad Ltd., Sri Ayudhya Capital Public Company Limited, Bangkok 16.83 186,447 16,287 Bandar Seri Begawan 25.03 10,999 1,906 Tecnologías de la Información y Redes para las Chicago Parking Meters LLC, Wilmington, DE 49.93 232,217 41,741 Entidades Aseguradoras S.A., Las Rozas de Madrid 6.03 34,817 3,633 CPIC Allianz Health Insurance Co. Ltd., Shanghai 22.93 106,351 (10,462) UniCredit S.p.A., Milan 1.03 32,697,000 (11,460,000) Delgaz Grid S.A., Târgu Mures 30.03 816,106 74,648 Zagrebacka banka d.d., Zagreb 11.73 1,957,654 226,156

3 Douglas Emmett Partnership X LP, Wilmington, DE 28.6 33,868 2,624 1_Percentage includes equity participations held by dependent entities in full, even if the Allianz Group’s share in the Four Oaks Place LP, Wilmington, DE 49.03 499,644 15,240 dependent entity is below 100 %. 2_Profit and loss transfer agreement. Helios Silesia Holding B.V., Amsterdam 45.03 64,096 (585) 3_As per annual financial statement 2016. Lennar Multifamily Venture LP, Wilmington, DE 11.33 905,806 (5,981) 4_Insolvent. Dependent entities are shown in a way, which reflects the state as of the date of filing for insolvency. Liverpool Victoria General Insurance Group Limited, 5_As per annual financial statement 2010. This is only applicable for manroland AG and their subsidiaries. Bournemouth 49.0 776,911 (24,953) Medgulf Allianz Takaful B.S.C., Seef 25.03 13,696 (219) OeKB EH Beteiligungs- und Management AG, Vienna 49.0 119,582 7,721 Residenze CYL S.p.A., Milan 33.33 120,521 578 SAS Alta Gramont, Paris 49.0 267,429 1,807 SCI Bercy Village, Paris 49.0 43,947 8,359 SK Versicherung AG, Vienna 25.83 14,240 985 SNC Alta CRP Gennevilliers, Paris 49.0 31,291 2,026 SNC Alta CRP La Valette, Paris 49.0 25,628 4,353 SNC Société d'aménagement de la Gare de l'Est, Paris 49.0 13,896 2,990 Solveig Gas Holdco AS, Oslo 30.03 320,410 38,551 UK Outlet Mall Partnership LP, Edinburgh 19.53 445,589 167,334 Wildlife Works Carbon LLC, San Francisco, CA 10.03 8,897 (969)

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82 Annual Report 2017 – Allianz SE

FURTHER INFORMATION D

Annual Report 2017 – Allianz SE 83 Repor t D – Further Information

RESPONSIBILITY STATEMENT

To the best of our knowledge, and in accordance with the applicable reporting principles, the financial statements of Allianz SE give a true and fair view of the assets, liabilities, financial position, and profit or loss of the company, and the management report includes a fair review of the development and performance of the business and the position of the company, together with a description of the principal opportunities and risks associated with the expected development of the company.

Munich, 13 February 2018

Allianz SE The Board of Management

Oliver Bäte Sergio Balbinot Jacqueline Hunt

Dr. Helga Jung Dr. Christof Mascher Niran Peiris

Giulio Terzariol Dr. Günther Thallinger Dr. Axel Theis

84 Annual Report 2017 – Allianz SE

D _ Further Information

INDEPENDENT AUDITOR’S REPORT

To Allianz SE, Munich the Annual Financial Statements and of the Management Report" section of our auditor's report. We are independent of the Company in accordance with the requirements of European law and German Report on the Audit of the Annual Financial commercial and professional law, and we have fulfilled our other Statements and of the Management Report German professional responsibilities in accordance with these re- quirements. In addition, in accordance with Article 10 (2) point (f) of the EU Audit Regulation, we declare that we have not provided non-

OPINIONS audit services prohibited under Article 5 (1) of the EU Audit Regula- We have audited the annual financial statements of Allianz SE, Mu- tion. We believe that the evidence we have obtained is sufficient and nich, which comprise the balance sheet as at 31 December 2017, and appropriate to provide a basis for our opinions on the annual finan- the statement of profit and loss for the financial year from 1 January cial statements and on the management report. to 31 December 2017, and notes to the financial statements, includ- ing the recognition and measurement policies presented therein. In KEY AUDIT MATTERS IN THE AUDIT OF THE ANNUAL addition, we have audited the management report of Allianz SE for FINANCIAL STATEMENTS the financial year from 1 January to 31 December 2017. In accord- Key audit matters are those matters that, in our professional judge- ance with the German legal requirements we have not audited the ment, were of most significance in our audit of the financial statements content of the Statement on Corporate Management pursuant to for the financial year from 1 January 2017 to 31 December 2017. Section 289f of the German Commercial Code [HGB] and the corpo- These matters were addressed in the context of our audit of the rate governance report according to No. 3.10 of the German Corpo- annual financial statements as a whole, and in forming our opinion rate Governance Code, which is included in section B of the man- thereon, and we do not provide a separate opinion on these matters. agement report. VALUATION OF SHARES IN AFFILIATED ENTERPRISES In our opinion, on the basis of the knowledge obtained in the audit, With regard to the accounting policies applied, please refer to the Company's explanations in the notes to the financial statements in − the accompanying annual financial statements comply, in all the section "Accounting, Valuation and Calculation Methods" under material respects, with the requirements of German commercial “Shares in affiliated enterprises and participations”, for a breakdown law applicable to insurance companies and give a true and fair and description of the changes in the financial year see the note view of the assets, liabilities and financial position of the Compa- "Investments in affiliated enterprises and participations" and for a ny as at 31 December 2017 and of its financial performance for presentation of the fair values and valuation reserves see the note the financial year from 1 January to 31 December 2017 in com- "Market value of investments". For a presentation of shareholdings, pliance with German Legally Required Accounting Principles, and please see the section "List of participations of Allianz SE, Munich, as − the accompanying management report as a whole provides an of 31 December 2017 according to Section 285 No. 11 and 11b HGB

appropriate view of the Company's position. In all material re- in conjunction with Section 286 (3) No. 1 HGB" in the notes. Risk dis- spects, this management report is consistent with the annual fi- closures can be found in the management report in the "Risk and nancial statements, complies with German legal requirements Opportunity Report" under section "Quantifiable risks and opportuni- and appropriately presents the opportunities and risks of future ties by risk category" under “Market risk” and “Credit risk”. development. Our opinion on the management report does not cover the content of the Statement on Corporate Management FINANCIAL STATEMENT RISK and the corporate governance report mentioned above. As at the reporting date shares in affiliated enterprises amount to

EUR 69,999.3 million. This represents 57.3 % of total assets. Shares in

Pursuant to Section 322 (3) sentence 1 HGB [Handelsgesetzbuch: affiliated enterprises represent a significant part of the investments. German Commercial Code], we declare that our audit has not led to Shares in affiliated enterprises are measured at the lower of cost any reservations relating to the legal compliance of the annual finan- or fair value. This fair value is generally determined on the basis of cial statements and of the management report. internal valuations and corresponding documentation. For all signifi- cant subsidiaries, the fair value is determined on the basis of a divi- BASIS FOR THE OPINIONS dend discount method according to IDW Standard S 1 of the German We conducted our audit of the annual financial statements and of Institute of Public Auditors [IDW S 1]. For life/health insurance com- the management report in accordance with Section 317 HGB and the panies, the fair value is determined based on the appraisal value. The EU Audit Regulation No. 537/2014 (referred to subsequently as "EU appraisal value is generally composed of the market consistent em- Audit Regulation") and in compliance with German Generally Accept- bedded value (MCEV), which reflects the value of the existing insur- ed Standards for Financial Statement Audits promulgated by the ance portfolio, and the estimated value of new business. The fair Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] value of asset management companies is determined from the fair (IDW). Our responsibilities under those requirements and principles value of the assets held less liabilities. are further described in the "Auditor's Responsibilities for the Audit of

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D – Further Information

The cash flows used for the dividend discount method are based VALUATION OF THE GROSS IBNR RESERVE FOR THE on income or cash flow projections for the next three years, and are PROPERTY-CASUALTY BUSINESS extrapolated based on assumptions for long-term growth rates. This With regard to the accounting policies applied, please refer to the involves determining both expected business development and sus- Company´s explanations in the notes to the financial statements tainable returns on investments. The applied discount rate is derived under section "Accounting, Valuation and Calculation Methods" in each case from the return of a risk-adequate alternative invest- under the “Insurance Reserves”. Risk disclosures can be found in the ment and requires judgement to determine the risk premium and the management report in the "Risk and Opportunity Report" under beta factor; this applies also for the growth rate. If the fair value is section "Quantifiable risks and opportunities by risk category" under lower than the book value, qualitative and quantitative criteria are “Underwriting Risk”, “Property-Casualty”. used to assess whether or not the impairment is expected to be per- manent. FINANCIAL STATEMENT RISK The calculation of the fair value according to the dividend dis- The gross reserves for loss and loss adjustment expenses amount to count method is complex and, as regards the assumptions made, EUR 12,092.7 million. This represents 9.9 % of the balance sheet total. based largely on estimations and assessments of the Company. A set A significant part of the gross reserve for loss and loss adjustment of parameters that are subject to judgement have to be determined expenses is attributable to the gross reserve for incurred but not for the purposes of valuation. reported (IBNR) reserve. The gross reserves for loss and loss adjustment expenses are de- OUR AUDIT APPROACH termined according to the cedent´s statements and the application of To audit the shares in affiliated enterprises, we engaged valuation actuarial and statistical models that require a sufficient data history experts and actuaries as part of the audit team. In particular, we and stability of the observed data. To this assumptions about premi- performed the following significant audit procedures: ums, ultimate loss ratios, run-off periods, run-off factors and run-off dynamics based on historical experience are taken into account. The − We used a risk-based audit approach. First, we used the infor- IBNR is determined in consideration of the results of actuarial meth- mation obtained during our audit to assess which shares in affili- ods, the cedent´s statements and additional information regarding ated enterprises indicated a need for impairment. We also evalu- the uncertainty of the calculations. ated the shares in affiliated enterprises in terms of their size and The valuation of the gross IBNR is subject to uncertainty and significance for the financial statements of Allianz SE. therefore based on judgements. Estimation uncertainties arise partic- − With the involvement of our valuation specialists, we assessed the ularly in respect of the amount of the ultimate loss and the run-off appropriateness of the significant assumptions and the valuation dynamics, particularly in the Liability business. model of the Company. For this purpose we discussed the ex- In accordance with German GAAP, this estimation must be made pected cash flows and the assumed long-term growth rates with in accordance with the prudence principle under German commercial

those responsible for planning. We also reconciled this infor- law (Section 252 (1) No. 4 HGB, Section 341e (1) sentence 1 HGB) and mation with other internally available forecasts. Furthermore, we may not be a risk-neutral equal weighting of opportunities and risks. evaluated the consistency of assumptions with external market The risk concerning unreported losses is that these losses are not, assessments. or not sufficiently, taken into account. − We also confirmed the accuracy of the Company's previous fore- casts by comparing the estimations in previous financial years OUR AUDIT APPROACH with actual results and analysed the deviations. For the audit of the IBNR, we engaged actuaries as part of the audit − We compared the assumptions and parameters underlying the team. In particular, we performed the following significant audit capitalisation rate, in particular the risk-free rate, the market risk procedures: premium and the beta factor, with our own assumptions and pub- licly available data. In order to take account of the uncertainty of − We recorded the process for determining the IBNR, identified key estimates, we also investigated the impact of potential changes controls and tested them for their appropriateness and effective- to the long-term growth rate and the combined ratio on the fair ness. We also verified that the controls were performed. value (sensitivity analysis) by calculating alternative scenarios and − We assessed the appropriateness of significant assumptions comparing these with the Company's valuations. To ensure the used, including loss ratios and assumptions about the run-off be- computational accuracy of the valuation model used, we verified haviour of claims. the Company's calculations on the basis of a risk-based sample. − We carried out our own actuarial reserve calculations for selected − We assessed whether impairments or reversals had been appro- segments, which we selected on the basis of risk considerations. In priately made based on the valuation results. doing so, for the ultimate loss expense, we determined a point es- timate and an appropriate range using statistical probabilities in OUR OBSERVATIONS each case and compared these with the Company's calculations. The approach used for impairment testing of shares in affiliated − We compared the level of reserving as at the reporting date with enterprises is appropriate and in line with the accounting policies. The that of the prior year. To do this, we particularly assessed the ap- assumptions and parameters used by the Company are appropriate propriateness of the way in which management, using reasona- as a whole. ble business judgement, made adjustments to the estimates that had been calculated by actuarial methods. We did this by in-

86 Annual Report 2017 – Allianz SE

D _ Further Information

specting and assessing the documentation of the underlying cal- Furthermore, management is responsible for the preparation of culations or qualitative explanations. the management report that as a whole provides an appropriate − We used the run-off results to analyse the actual development in view of the Company’s position and is, in all material respects, con- the reserves for loss and loss adjustment expenses recognised in sistent with the annual financial statements, complies with German the prior year (including the IBNR reserve) for their retrospective legal requirements, and appropriately presents the opportunities and appropriateness. risks of future development. In addition, management is responsible for such arrangements and measures (systems) as they have consid- OUR OBSERVATIONS ered necessary to enable the preparation of a management report The Company's approach for the valuation of the IBNR reserve in the that is in accordance with the applicable German legal requirements, Property-Casualty business is appropriate and suitable. The methods and to be able to provide sufficient appropriate evidence for the used as well as the underlying assumptions for the valuation of this assertions in the management report. IBNR reserve are appropriate as a whole. The supervisory board is responsible for overseeing the Compa- ny's financial reporting process for the preparation of the annual OTHER INFORMATION financial statements and of the management report. Management is responsible for the other information. The other information comprises: AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE ANNUAL FINANCIAL STATEMENTS AND OF THE − the Statement on Corporate Management pursuant to Section MANAGEMENT REPORT 289f HGB and the corporate governance report according to No. Our objectives are to obtain reasonable assurance about whether the 3.10 of the German Corporate Governance Code, and annual financial statements as a whole are free from material mis- − the remaining parts of the annual report of Allianz SE, with the statement, whether due to fraud or error, and whether the manage- exception of the audited annual financial statements and man- ment report as a whole provides an appropriate view of the Compa- agement report and our auditor's report. ny's position and, in all material respects, is consistent with the annual financial statements and the knowledge obtained in the audit, com- Our opinions on the annual financial statements and on the man- plies with the German legal requirements and appropriately presents agement report do not cover the other information, and consequent- the opportunities and risks of future development, as well as to issue ly we do not express an opinion or any other form of assurance con- an auditor's report that includes our opinions on the annual financial clusion thereon. statements and on the management report. Reasonable assurance is a high level of assurance, but is not a In connection with our audit, our responsibility is to read the other guarantee that an audit conducted in accordance with Section information and, in doing so, consider whether the other information 317 HGB and the EU Audit Regulation and in compliance with Ger- man Generally Accepted Standards for Financial Statement Audits − is materially inconsistent with the annual financial statements, promulgated by the Institut der Wirtschaftsprüfer (IDW) will always with the management report or our knowledge obtained in the detect a material misstatement. Misstatements can arise from fraud audit, or or error and are considered material if, individually or in the ag- − otherwise appears to be materially misstated. gregate, they could reasonably be expected to influence the econo- mic decisions of users taken on the basis of these annual financial RESPONSIBILITIES OF MANAGEMENT AND THE statements and this management report. SUPERVISORY BOARD FOR THE ANNUAL FINANCIAL STATEMENTS AND THE MANAGEMENT REPORT We exercise professional judgement and maintain professional scep- Management is responsible for the preparation of the annual finan- ticism throughout the audit. We also: cial statements that comply, in all material respects, with the require- ments of German commercial law applicable to insurance compa- − Identify and assess the risks of material misstatement of the nies, and that the annual financial statements give a true and fair annual financial statements and of the management report, view of the assets, liabilities, financial position and financial perfor- whether due to fraud or error, design and perform audit proce- mance of the Company in compliance with German Legally Required dures responsive to those risks, and obtain audit evidence that is Accounting Principles. In addition, management is responsible for sufficient and appropriate to provide a basis for our opinions. The such internal control as they, in accordance with German Legally risk of not detecting a material misstatement resulting from fraud Required Accounting Principles, have determined necessary to ena- is higher than for one resulting from error, as fraud may involve ble the preparation of annual financial statements that are free from collusion, forgery, intentional omissions, misrepresentations, or the material misstatement, whether due to fraud or error. override of internal controls. In preparing the annual financial statements, management is re- − Obtain an understanding of internal control relevant to the audit sponsible for assessing the Company's ability to continue as a going of the annual financial statements and of arrangements and concern. They also have the responsibility for disclosing, as applica- measures (systems) relevant to the audit of the management re- ble, matters related to going concern. In addition, they are responsi- port in order to design audit procedures that are appropriate in ble for financial reporting based on the going concern basis of ac- the cicumstances, but not for the purpose of expressing an opinion counting, provided no actual or legal circumstances conflict therewith. on the effectiveness of these systems.

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D – Further Information

− Evaluate the appropriateness of accounting policies used by Other Legal and Regulatory Requirements management and the reasonableness of estimates made by management and related disclosures. − Conclude on the appropriateness of management's use of the FURTHER INFORMATION PURSUANT TO ARTICLE 10 going concern basis of accounting and, based on the audit evi- OF THE EU AUDIT REGULATION dence obtained, whether a material uncertainty exists related to We were elected as auditor by the supervisory board meeting on events or conditions that may cast significant doubt on the Com- 9 March 2017. We were engaged by the chairman of the audit com- pany's ability to continue as a going concern. If we conclude that mittee of the supervisory board on 13 June 2017. We have been the a material uncertainty exists, we are required to draw attention in auditor of Allianz SE without interruption for more than 25 years. the auditor's report to the related disclosures in the annual finan- We declare that the opinions expressed in this auditor's report cial statements and in the management report or, if such disclo- are consistent with the additional report to the audit committee sures are inadequate, to modify our respective opinions. Our con- pursuant to Article 11 of the EU Audit Regulation (long-form audit clusions are based on the audit evidence obtained up to the date report). of our auditor's report. However, future events or conditions may cause the Company to cease to be able to continue as a going GERMAN PUBLIC AUDITOR RESPONSIBLE FOR THE concern. ENGAGEMENT − Evaluate the overall presentation, structure and content of the The German Public Auditor responsible for the engagement is Andre- annual financial statements, including the disclosures, and as Dielehner. whether the annual financial statements present the underlying transactions and events in a manner that the annual financial Munich, 28 February 2018 statements give a true and fair view of the assets, liabilities, finan- cial position and financial performance of the Company in com- KPMG AG pliance with German Legally Required Accounting Principles. Wirtschaftsprüfungsgesellschaft − Evaluate the consistency of the management report with the [Original German version signed by:] annual financial statements, its conformity with [German] law, and the view of the Company's position it provides. − Perform audit procedures on the prospective information pre- sented by management in the management report. On the basis of sufficient appropriate audit evidence we evaluate, in particular, the significant assumptions used by management as a basis for the prospective information, and evaluate the proper derivation of the prospective information from these assumptions. We do not express a separate opinion on the prospective information and on the assumptions used as a basis. There is a substantial Becker Dielehner unavoidable risk that future events will differ materially from the Wirtschaftsprüfer Wirtschaftsprüfer prospective information. [German Public Auditor] [German Public Auditor] We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a state- ment that we have complied with the relevant independence re- quirements, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independ- ence, and where applicable, the related safeguards. From the matters communicated with those charged with gov- ernance, we determine those matters that were of most significance in the audit of the annual financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclo- sure about the matter.

88 Annual Report 2017 – Allianz SE

Allianz SE – Königinstrasse 28 – 80802 Munich – Germany – Phone + 49 89 3800 0 – [email protected] – www.allianz.com Front page design: hw.design GmbH – Typesetting: Produced in-house with firesys Annual Report on the internet: www.allianz.com/annualreport – Date of publication: 9 March 2018 This is a translation of the German Annual Report of Allianz SE. In case of any divergences, the German original is legally binding.